Navitas Semiconductor's Volatile Rally: A Contrarian's Short-Selling Play

The stock of Navitas Semiconductor (NASDAQ: NVTS) has been a rollercoaster in June 2025, surging 54% on speculative fervor tied to a partnership with NVIDIA and short-covering rallies. Yet beneath the technical explosion lies a company struggling with declining revenues, mounting losses, and insider selling. For contrarian investors, this disconnect presents a compelling short-selling opportunity—provided they can stomach the volatility.

The Surge: Speculation Over Substance

Navitas' stock skyrocketed from $5.05 to $9.17 on June 11, 2025, after announcing its gallium nitride (GaN) chips would power NVIDIA's 800V DC architecture for data centers. The deal, though promising, remains a forward-looking catalyst: revenue contributions aren't expected until 2026. Instead, the surge was fueled by speculative forces.

High-frequency trading algorithms and retail investors chasing FOMO (Fear of Missing Out) drove volumes to 104.4 million shares on June 11—over eight times its average daily volume. Meanwhile, short sellers faced a brutal squeeze: with 18.4% of shares shorted, the sudden rally forced traders to buy back shares at inflated prices, further amplifying the move.

Fundamentals Under Pressure

The stock's surge contrasts starkly with Navitas' financial reality. In Q2 2025, revenue fell 39.7% year-over-year to $14.02 million due to supply chain bottlenecks, and the company reported a $0.06 EPS loss. With a net loss of $145.4 million over the past four quarters and a P/S ratio of 20.5x—versus the S&P 500's 3.0x—valuation concerns loom large.

Insiders have been capitalizing on the rally. CFO Todd Glickman sold 532,342 shares at $4.49 on June 22, part of $99.9 million in insider sales over 90 days. This exodus suggests confidence in the stock's long-term prospects is uneven, even among those closest to the company.

Risks of a Mean-Reversion

The current price—$7.00 as of June 18—appears detached from tangible fundamentals. While analysts project $100 million+ in NVIDIA-related revenue by 2026, execution risks abound. Competitors like Infineon and STMicroelectronics are aggressively expanding their GaN/SiC offerings, threatening pricing power. Additionally, Navitas' burn rate requires constant capital raising: its recent $50 million ATM offering, while strategic, will dilute shareholders.

The stock's extreme volatility also hints at a potential correction. Technical indicators suggest overextension: the 54% surge in days has left NVTS well above its 200-day moving average. Historically, such retail-driven rallies often revert to the mean once speculative momentum fades.

The Contrarian Play: Shorting the Excess

For investors willing to bet against the hype, shorting NVTS could yield outsized returns. Key catalysts for a downward swing include:
1. Reality Check on NVIDIA Deal: If the partnership's revenue materializes slower than expected, the stock could plummet.
2. Valuation Reversion: A P/S ratio of 20.5x is unsustainable in a sector where peers trade at a fraction of that.
3. Institutional Skepticism: Analysts' $3.71 average price target (vs. $7.00) reflects deep skepticism about the stock's current pricing.

Risk Management for Shorts

The strategy isn't without risks. Shorts must brace for further volatility: another partnership announcement or a positive earnings surprise could spark another surge. Position sizing and stop-losses are critical. Additionally, the stock's high short interest (18.4%) means further selling could trigger a short squeeze—though the recent rally may have already exhausted some of that pressure.

Conclusion: The Reckoning Awaits

Navitas Semiconductor's June 2025 rally is a classic example of speculation outrunning reality. While its GaN/SiC technology holds long-term promise, the stock's valuation and fundamentals are misaligned. For contrarians, the setup is ripe: a volatile, overbought stock with weak earnings and insider skepticism. Shorting NVTS could capitalize on the inevitable reckoning—provided investors stay disciplined and avoid getting crushed by fleeting momentum.

Investment Thesis: Consider shorting NVTS with tight stops, targeting a reversion to analyst consensus levels ($3.71) or lower. Monitor for signs of execution delays on the NVIDIA deal or margin pressure that could accelerate the decline.

Disclosure: This analysis is for informational purposes only and should not be construed as personalized investment advice.