Can Microchip's Micron Alliance Help it Challenge AVGO & ALAB?

Microchip Technology MCHP announced on Tuesday (Aug. 4) that it will showcase an end-to-end PCIe Gen 6 storage architecture, which combines its Switchtec PCIe Gen 6 switches with Micron’s MU 9650 NVMe solid-state drives (SSDs). The architecture will strengthen MCHP’s prospects in the rapidly expanding AI and enterprise data-center market. The collaboration with Micron expands MCHP’s opportunity across hyperscalers, enterprise-server manufacturers, storage vendors and semiconductor companies building CPU- and GPU-based platforms. It also strengthens Microchip’s competitive prowess against Broadcom AVGO and Astera Labs ALAB. 

The combination of Microchip’s Switchtec PCIe Gen 6 switches with Micron’s high-performance 9650 NVMe SSDs offers greater bandwidth, lower latency and scalable storage connectivity for AI, high-performance computing (HPC) and cloud workloads. Micron’s 9650 is positioned as the first PCIe Gen 6 data-center SSD and offers as much as twice the performance of PCIe Gen 5 drives. Pairing these drives with MCHP’s Switchtec switches allows multiple high-speed storage devices to connect efficiently with processors, accelerators and memory resources. This is particularly relevant in disaggregated computing architectures, where data must move rapidly among increasingly distributed compute and storage components.

The combination also highlights the performance advantages of Microchip’s latest Switchtec platform. The company’s PCIe Gen 6 switches are manufactured using a 3-nanometer process, support configurations of up to 160 lanes and are designed to deliver lower power consumption in high-density AI systems. Microchip offers Switchtec switches along with storage controllers, memory controllers, retimers, power-management devices and timing products, which reflects the company’s focus on offering a broader system-level solution rather than competing with a stand-alone switching component.

This broader portfolio could give Microchip an important competitive advantage. Customers adopting PCIe Gen 6 must address switching, signal integrity, storage control, timing, power and management-software requirements simultaneously. MCHP can potentially supply several of these elements, supported by its ChipLink tools, unified management software and cross-product visibility. Such integration can shorten customer development cycles, improve interoperability and raise the amount of Microchip content in each platform. It also supports MCHP’s Total System Solutions strategy, under which an anchor-product design win can lead to the attachment of several complementary Microchip products.

MCHP Faces Tough Competition

Broadcom competes with Microchip in PCIe switches, PCIe retimers, networking, and storage connectivity, while Astera Labs offers PCIe Gen 6 fabric switches, PCIe retimers and CXL memory connectivity.

Broadcom is rapidly strengthening its position across AI infrastructure, creating competitive pressure for Microchip in high-performance data centers. The company expects AI semiconductor revenue to reach $56 billion in FY2026, up approximately 180% year over year, with revenue projected to exceed $100 billion in FY2027, driven by custom AI accelerators (XPUs) and networking solutions for six major hyperscale AI customers.

Astera Labs’ close alignment with hyperscale cloud providers and GPU platform roadmaps position it to capture an increasing share of next-generation AI server designs. One of the company's biggest competitive strengths is its Scorpio AI Fabric Switch portfolio. Astera Labs said Scorpio X-Series has entered volume production and is expected to become its largest product family in the third quarter, one quarter earlier than previously expected. The company is already shipping multiple Scorpio X configurations into hyperscale AI platforms and expects deployments to expand across additional customers by year-end.

MCHP’s Share Price Performance, Valuation & Estimates

Shares of Microchip have appreciated 21.8% year to date, outperforming the broader Zacks Computer and Technology sector’s rise of 18.6%.

MCHP Stock’s Price Performance

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The MCHP stock is trading at a premium, with a forward 12-month price/earnings of 23.44X compared with the broader sector’s 21.96X. Microchip has a Value Score of D.

MCHP’s Valuation

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The Zacks Consensus Estimate for Microchip’s fiscal 2027 earnings is currently pegged at $3.14 per share, up by a nickel over the past 30 days, suggesting 91.46% growth from fiscal 2026’s reported figure.
 

Microchip currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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