Is Now the Time to Buy Power Integrations (POWI) Amid Tariff Uncertainty and GaN Momentum?

The stock market's love affair with high-growth tech companies has always been a rollercoaster, but for Power Integrations (NASDAQ: POWI), the ride has been particularly bumpy in 2025. After a 1.66% post-earnings selloff on August 6, 2025, the stock has lost 21.7% year-to-date, underperforming the S&P 500's 7.1% gain. Yet, beneath the near-term volatility lies a compelling story of strategic positioning in the high-power GaN (gallium nitride) market, a leadership transition, and a long-term vision that could redefine the company's trajectory.

GaN Momentum: A Catalyst for Growth

Power Integrations' Q2 2025 earnings report highlighted a 50% year-over-year surge in GaN-based product revenues, driven by adoption in AI data centers, electric vehicles (EVs), and industrial applications. This growth is not just a blip—it reflects a structural shift in power electronics. GaN's superior efficiency and compact design make it ideal for high-power applications, where demand is accelerating. The company's 1250- and 1700-volt GaN technologies, for instance, are now being integrated into next-generation EV traction inverters and solar storage systems, positioning POWI at the intersection of clean energy and electrification.

Analysts argue that GaN adoption is still in its early innings. With global GaN markets projected to grow at a 20% CAGR through 2030, Power Integrations' first-mover advantage in design wins—particularly in automotive and industrial sectors—could translate into durable revenue streams. The company's CEO, Jennifer Lloyd, who took the helm in July 2025, emphasized this during the earnings call: “GaN is not just a product line; it's a platform for innovation in high-power applications. Our design wins in EVs and data centers are accelerating faster than we anticipated.”

Leadership Transition: A Double-Edged Sword

Lloyd's arrival marks a pivotal moment for Power Integrations. Her prior experience at Tesla and Analog Devices brings a fresh perspective on scaling high-margin technologies in capital-intensive markets. However, transitions often come with short-term friction. The company incurred $9 million in one-time legal and executive transition costs in Q2, which dented GAAP net income to $0.02 per share. While non-GAAP EPS of $0.35 exceeded the Zacks Consensus Estimate, the GAAP miss underscored the risks of operational disruption.

Investors must weigh whether Lloyd's strategic focus on automotive and AI will offset near-term execution risks. The CEO's goal of achieving $100 million in automotive revenue by 2029 is ambitious but achievable given the company's existing partnerships with EV manufacturers and its pipeline of GaN-based traction inverter designs.

Tariff Uncertainty: A Near-Term Headwind

The elephant in the room is macroeconomic uncertainty, particularly U.S.-China tariff dynamics. Power Integrations' consumer appliance segment—accounting for 20% of revenue—has been hit by stagnant housing demand and customer hesitation over potential tariff hikes. Management acknowledged this during the earnings call, revising Q3 revenue guidance to $118 million ±$5 million, a more conservative outlook than previous quarters.

While tariffs are a drag on near-term visibility, they also create opportunities. Companies that can pivot to domestic manufacturing or secure design wins in tariff-insensitive markets (e.g., EVs, data centers) may emerge stronger. Power Integrations' alignment with the U.S. CHIPS Act and its $32.6 million share repurchase program signal confidence in navigating these headwinds.

Post-Earnings Selloff: Opportunity or Overreaction?

The 1.66% post-earnings drop, though painful, may be a buying opportunity for long-term investors. Despite the EPS miss, the company exceeded revenue expectations by 0.9%, and its cash flow from operations ($29.1 million) and balance sheet strength ($201.8 million in marketable securities) remain robust. Analysts have maintained price targets between $60 and $75, implying 28–55% upside from current levels.

However, the stock's P/E ratio of 76.17 and PEG ratio of 2.10 suggest it is priced for perfection. A misstep in Q3—whether from weaker-than-expected GaN adoption or a deeper tariff-driven slowdown—could test this valuation. Investors should monitor the company's ability to meet its Q3 guidance and secure key design wins in 2026.

Strategic Verdict: Buy the Dip or Wait?

Power Integrations is a high-conviction play for those comfortable with volatility. The company's proprietary GaN technology, expanding automotive design wins, and leadership transition present a compelling long-term case. However, near-term risks—tariff uncertainty, litigation costs, and inventory adjustments—demand caution.

For investors with a 12–18 month horizon, the post-earnings selloff offers a discounted entry point, provided the company can execute on its strategic priorities. For others, waiting for clearer Q3 results and a more stable macroeconomic environment may be prudent.

In the end, the question is whether Power Integrations can transform its GaN momentum into sustainable revenue growth while navigating the turbulence of a shifting global economy. If the company can do so, the current discount may prove to be a golden opportunity.