Updated 11/14/2025 12:31 PM ET
When many people think of artificial intelligence, they get visions of products relying on central, cloud-based servers.
But AI stock Ambarella (AMBA), which has surged from recent lows, addresses the need for empowered, localized devices.
The Santa Clara, Calif. company focuses on the so-called "edge AI" space. It designs system-on-a-chip, or SoC, semiconductors which are capable of performing complex tasks directly on devices. This is important in areas such as computer vision.
Ambarella specializes in serving the automotive, security camera and robotics spaces. Customers include the likes of Ford (F) startup Canopy, LG and Kodiak AI (KDK).
The artificial intelligence stock is a sturdy all-around performer, with its IBD Composite Rating sitting at 96 out of 99.
It also has a solid, but not ideal, Earnings Per Share Rating of 80. It has swung from losses to profit in each of the past four quarters, a positive sign.
Wall Street is looking for Ambarella to swing to a profit of 49 cents in the current fiscal year from a full-year loss of 16 cents per share last year. Earnings are then seen rising 6% in fiscal 2027, MarketSurge data shows.
One risk event to be aware of is the company's fiscal third-quarter earnings report after the close on Nov. 26. An approach highlighted by Investor's Business Daily is to use options as a strategy to reduce risk around earnings. It's a way to capitalize on the upside potential of a stock's move around earnings while reducing the downside risk.
Analysts Bullish On AI Stock
Wall Street analysts are currently bullish on the AI stock's prospects. Ambarella holds a consensus rating of strong buy with an average price target of 96.60, according to TipRanks.
Rosenblatt Senior Analyst Kevin Cassidy rates the stock as a buy with a 100 target. Cassidy said Ambarella possesses "AI product momentum" and that he's "encouraged by a strong design pipeline."
"Adoption of its 5nm SoCs in Edge AI applications is fueling year-over-year growth, supported by both higher average selling prices and increased unit shipments," he said in an Aug. 7 note to clients. "The company's new AI portfolio spans portable video devices, robotic aerial drones, and edge infrastructure."
Craig-Hallum Senior Analyst Richard Shannon is even more bullish, rating it as a buy with a 105 target.
"AMBA is a leader in the AI market, although not thought of this way by most investors, specifically within inferencing at the edge," he said in a Sept. 25 research note. "We see this as a future growth driver within the AI market, and believe AMBA's strong silicon/software platform, which has excellent power/performance characteristics, is a strong base from which to drive continued growth in current and emerging markets."
Shannon has also been impressed by the the company's strong execution across its entire business, which he thinks will continue in the future.
Ambarella Stock Analysis
Ambarella stock has tested a consolidation ideal buy point of 93.44, MarketSurge analysis shows. This is a first-stage pattern, a plus as IBD research has found such bases have a better chance of success.
While the stock has been forced back amid broader negative market action, so far it is holding above its 50-day moving average. It is also battling for its 21-day exponential moving average.
Also, although its relative strength line is currently taking a pause, it remains near recent highs amid a strong uptrend.
While the stock has fallen more than 5% below the consolidation buy point, this comes amid a broad market pullback. If the stock gets good support and can rally from here, the entry would still be in play.
The AI stock ran up as much as 149% above 2025 lows before easing back. Its gain for the year is more modest, at around 22%. Nevertheless, this is superior to the benchmark S&P 500's lift of around 15%.
Institutions have been net buyers of Ambarella stock lately, which is reflected in its Accumulation/Distribution Rating sitting at B-. In total, 53% of shares are held by funds.
Please follow Michael Larkin on X at @IBD_MLarkin for more analysis of growth stocks.
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