Citi upgrades Murata's rating, betting on AI servers to drive a surge in passive component profits

BlockBeats News, June 30: Citi has upgraded Murata Manufacturing's rating from "Neutral" to "Buy" and significantly raised its target price from 3,900 yen to 15,000 yen, citing that demand for artificial intelligence servers is reshaping the growth curve of the high-end MLCC market.

In a research report released on June 29, Citi stated that AI servers require much higher quantities and specifications of multilayer ceramic capacitors compared to traditional servers. Ordinary server motherboards use about 2,000 MLCCs, while AI server GPU boards could approach 11,000 units by 2026. As power consumption of AI accelerators increases and current fluctuations intensify, servers need more high-capacitance, high-reliability components, which is driving up Murata’s product mix and average selling prices.

Citi believes Murata is one of the main beneficiaries of this change. The bank estimates Murata's share of the AI server high-capacitance MLCC market at around 50%, ahead of Samsung Electro-Mechanics and Taiyo Yuden, thanks to its yield rates, material technology, and high-end mass production capabilities. In addition to its regular annual expansion, Murata has added about 20% in capacity, and Citi says that if demand continues to rise, further expansion may also become necessary.

Earnings forecasts have also been significantly revised upwards. Citi expects Murata's operating profit for FY3/27 to reach 440 billion yen, rising to 630 billion yen in FY3/28, and further increasing to 800 billion yen in FY3/29. The bank stated that profit growth mainly comes from increased MLCC shipments for AI servers, and improved prices due to a higher proportion of high-spec products.

However, Citi has not assumed that Murata will implement a widespread price increase for general MLCCs. The report claims the company is currently more likely to improve its profitability through its AI server product portfolio rather than actively pursue industry-wide price hikes. However, if supply and demand for high-end MLCCs continue to tighten, or competitors raise prices first, Murata may still have additional upside potential.

This report shows AI transactions are spreading from GPU and HBM to the broader hardware supply chain. For Murata, the market focus is no longer just on the smartphone and automotive cycles, but on whether AI servers can become a new core driver of profit growth.