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GlobalFoundries (GFS) inches higher today after releasing its long-term revenue growth target in its Investor Presentation yesterday after the closing bell. GFS projected +8-12% annualized growth over the long term, a substantial rebound from the 9% drop experienced in FY23 but not quite the return to the +23% and +36% pops the company enjoyed in FY22 and FY21, respectively.

What does GFS do? It manufactures semiconductors similar to Taiwan Semi (TSM) but with one colossal difference. GFS does not produce high-end, technologically superior chips used in AI applications. Instead, the company, which was a former arm of Advanced Micro (AMD), hunkered down on manufacturing chips that are less cutting-edge and more essential to power everyday devices, including household appliances like refrigerators and dishwashers. GFS's chips are also found in smartphones -- aiding power management -- vehicles, and numerous other electronic devices.

Without massive exposure to the AI space, like NVIDIA (NVDA) and AMD, GFS has not benefited strongly from the unwavering AI frenzy. Shares are down roughly 30% YTD and have mostly flatlined over the past five years. However, GFS touts a few other advantages that make it worth keeping on the radar for a potentially meaningful recovery down the road.

• Following a sequential bump in revenue in Q2, GFS reiterated last month that it believed Q1 marked the low point for sales this year, expecting further improvement in Q3. The company commented last week that while a recovery in China could be uneven, interest rates easing in the Western Hemisphere should facilitate more robust consumer demand across numerous applications.
• Opportunities in power management remain compelling. Management stated in Q2 that its customers are looking to build the next generation of power management technologies in the U.S. as the need to communicate data continues to translate into new requirements for more efficient power management. On Semi (ON) remarked in late July that as power consumed by AI data center racks increases by threefold, its addressable content is expected to surge by nearly fourfold.
  • As a result, GFS purchased Tagore Technology's gallium nitride power business, which included an extensive IP portfolio. With Tagore, GFS expects its serviceable addressable market to soar by around $1.6 bln by 2030.
• With the relationship between the U.S. and China tense, companies may be looking to reduce their dependence on TSM and China-based foundries. GFS is based in New York, with production occurring across the U.S., Singapore, and parts of Europe. Also, geopolitical tensions are likely keeping existing customers from allocating orders to China. GFS stated last week that it is not witnessing much customer migration toward China despite many new foundries being constructed in the region.

GFS's long-term targets issued last night might not have rekindled much interest in the stock today. However, the company has gears in motion, laying the groundwork for a potential turnaround. A broader economic recovery, an uptick in power management chip demand, and a U.S.-based presence are all items working in GFS's favor.