TSEM Stock Bucks Market Selloff On Semtech AI Chip Deal Securing Capacity Across 3 Regions

Tower CEO Russell Ellwanger said the companies are qualifying solutions ahead of anticipated demand for future generations of optical connectivity products.

• Semtech will invest in securing dedicated silicon germanium capacity at Tower’s facilities in the U.S., Israel and Japan.
• The agreement is intended to support demand for optical interconnect components and connectivity technologies spanning 800G, 1.6T and 3.2T.
• The companies will continue joint technology development, including work on optical components built using Tower’s SiGe manufacturing technology.

Tower Semiconductor (TSEM) on Tuesday announced that it was extending its 20-year partnership with Semtech (SMTC) with a multi-year agreement aimed at securing chip supply for AI data center connectivity products.

The company said that Semtech would invest in securing dedicated silicon germanium (SiGe) manufacturing capacity at Tower to support strong design wins and rising demand for optical interconnect components used in AI data centers. 

It added that the capacity will span Tower’s manufacturing facilities in the U.S., Israel and Japan, giving Semtech greater supply assurance and geographic diversification.

TSEM stock rose as much as 2% in pre-market trade. On Stocktwits, retail sentiment around the company dipped to ‘neutral’ from ‘bullish’ territory over the past day. 

Meanwhile, SMTC stock fell over 3% with sentiment trending in ‘bearish’ territory, despite getting a price target hike from BMO Capital. Analyst Harsh Kumar raised the price target to $230 from $255 and reiterated an ‘Outperform’ rating on the shares ahead of the firm’s analyst day later this week. 

Tower, Semtech Target Next Generation Of AI Data Center Connectivity

Semtech CEO Hong Hou said the expanded agreement would help the company meet rising customer demand and support the next generation of connectivity products.

“Meeting that demand requires long-term capacity planning and commitment with our manufacturing partners,” Hou said, adding that the agreement would support copper and optical interconnects from 800 gigabits per second (G) and 1.6 terabits per second (T) through 3.2T and beyond.

The agreement comes as AI data centers require faster connections to move increasing volumes of data between processors, servers and storage systems. 

Partnership Covers Manufacturing Capacity, Technology Development

The companies said their collaboration extends beyond securing manufacturing capacity to joint technology development. 

Semtech recently received an Optical Component Innovation award at the European Conference on Optical Communication (ECOC) 2026 for its 224-gigabits-per-second-per-lane transimpedance amplifier family for linear pluggable optics, which is built on Tower’s SiGe technology.

Tower CEO Russell Ellwanger said the companies were qualifying solutions ahead of anticipated market demand to prepare for the next generations of optical connectivity products.

TSEM stock has gained over 70% this year, while SMTC stock has more than doubled, surging over 120%. 

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