NextFin News - STMicroelectronics NV has doubled its revenue forecast for its data center business, now projecting the unit will generate $1 billion in annual sales by 2027. The Franco-Italian chipmaker, traditionally a titan in automotive and industrial semiconductors, is aggressively pivoting toward the artificial intelligence infrastructure market to offset a prolonged slump in its core electric vehicle and factory equipment segments.
The revised guidance, delivered during a capital markets presentation on Tuesday, marks a significant acceleration from previous estimates that pegged the $1 billion milestone for the end of the decade. Chief Executive Officer Jean-Marc Chery attributed the shift to a surge in demand for power management chips and optical interconnects required by the massive server clusters powering generative AI. The company now expects data center revenue to reach $500 million as early as 2026, effectively bridging the gap while the automotive sector undergoes a painful inventory correction.
Jean-Marc Chery has maintained a consistently pragmatic stance throughout his tenure, often prioritizing long-term manufacturing independence over short-term margin spikes. While his latest optimism regarding AI infrastructure is supported by a deepening partnership with Amazon.com Inc.’s AWS, some analysts remain cautious. Sandeep Deshpande of JPMorgan Chase & Co., who has historically maintained a neutral to slightly cautious view on European semi-cap stocks, noted that while the data center growth is "encouraging," it still represents a relatively small fraction of STMicro’s total revenue, which exceeded $17 billion last year. Deshpande’s skepticism centers on whether this high-growth niche can truly compensate for the structural weakness in the European automotive supply chain.
The pivot comes at a critical juncture for U.S. President Trump’s administration, which has been pressuring European tech firms to align more closely with Western supply chain security initiatives. STMicro’s expansion into data centers involves sophisticated power-discrete components and silicon carbide (SiC) technology, areas where it faces stiff competition from Infineon Technologies AG and Onsemi. Unlike the "AI-only" narrative surrounding firms like Nvidia, STMicro’s play is one of efficiency—providing the power-delivery systems that prevent AI servers from overheating and wasting energy.
However, the $1 billion target is not without significant execution risk. The company’s heavy reliance on the automotive sector—which accounts for roughly 40% of its sales—means that any further delays in EV adoption could drain the capital needed to fund its data center R&D. Furthermore, the "AI gold rush" in infrastructure is increasingly crowded. While STMicro’s chips are essential, they are often lower-margin "sockets" compared to the high-value GPUs they support. If cloud service providers begin to consolidate their vendor lists or if the current AI capital expenditure cycle cools, STMicro could find itself with expensive, underutilized capacity in its new fabrication plants.
From a broader market perspective, this forecast is more of a strategic repositioning than a guaranteed windfall. The company is betting that the power-hungry nature of AI will make its analog and power expertise indispensable. Yet, until the automotive and industrial markets—the traditional bread and butter of the European semiconductor industry—show signs of a definitive bottom, STMicro’s ambitious data center goals will likely be viewed by the broader market as a necessary hedge rather than a total transformation.
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