NIO Stock Could Get Geely Boost As Chip Push Expands Beyond Own Evs - Analyst Calls Shares 'Undervalued'

(MENAFN- AsiaNet News)

• Geely is reportedly considering two Nio M97 chips for a Level 3 autonomous-driving system.
• The M97 delivers over 700 TOPS, topping Horizon Robotics' 560-TOPS Journey 6P.
• Morningstar cut Nio's U.S. fair value to $6 from $6.50, but still calls the stock“undervalued.”

Nio's semiconductor ambitions may be gaining momentum, with Geely reportedly weighing its M97 chip for an autonomous-driving system as Morningstar sees nearly 50% upside in the EV maker's shares.

Nio's U.S.-listed shares fell 4% on Wednesday, extending their decline for a second consecutive session and closing at their lowest level in more than a year. 

Geely Eyes Nio's M97 Chip

Geely's preliminary plan calls for using two M97 chips to develop a Level 3 autonomous-driving system, Chinese media outlet 36Kr reported Wednesday, citing people familiar with the matter. The report did not say whether Geely and Nio's chip unit, GeniTech - also known as Shenji - had signed a nomination or supply agreement. Potential vehicle models, procurement volumes and a mass-production timeline were also not disclosed.

Still, the development suggests the discussions have progressed since March, when Shenji and development partner Axera Semiconductor were reportedly pitching the M97 to automakers including Geely and Leapmotor. Chery and Leapmotor have also shown interest in the chip, though the status of those talks remains unclear.

The M97, designed for third-party customers, delivers more than 700 trillion operations per second, or TOPS, of computing power. It is positioned against Horizon Robotics' Journey 6P, which provides 560 TOPS. The supposed deal comes as Chinese automakers seek competitively priced domestic processors, while retaining greater control over their driver-assistance algorithms.

Morningstar Sees Nearly 50% NIO Upside

The potential Geely catalyst comes as Morningstar maintains a positive valuation view on Nio after its second-quarter (Q2) results. The research firm lowered its fair-value estimate for Nio's U.S.-listed shares to $6 per American depositary share from $6.50. It also cut its valuation for the Hong Kong-listed shares to HK$46.50 from HK$50.

Even after the reduction, the Hong Kong target implies nearly 50% upside from Nio's Sept.1 closing price. Morningstar assigned the stock a four-star rating and said the shares remain“undervalued,” although it said uncertainty was“very high.”

Nio's Q2 revenue surged 69% from a year earlier, while its net loss narrowed 86%. A stronger product mix drove a 21% recovery in vehicle pricing and lifted vehicle margin by eight percentage points, while operating expenses declined 6%. 

However, revenue missed the lower end of Nio's previous guidance, and vehicle margins fell short of Morningstar's expectations. Rising battery and memory-chip prices offset some of the benefits from robust demand for the higher-priced ES8 SUV. Nio expects vehicle margins to remain around second-quarter levels through the end of 2026.

Analyst Calls NIO Outlook 'Too Optimistic' 

Nio guided for third-quarter deliveries of 108,000 to 111,000 vehicles, representing growth of 24% to 27% from a year earlier. The midpoint implies 37,700 deliveries in September, which Morningstar believes would fall short of market expectations.

Nio expects monthly sales to reach 40,000 vehicles in the fourth quarter and is targeting volume growth of between 40% and 50% in 2027. Morningstar called the forecast“too optimistic,” pointing to diminishing subsidies. The firm cut its 2026-2030 vehicle-sales estimates by 2% to 8% and its revenue forecasts by 1% to 6%. It also raised its projected 2026 net loss by 5% and lowered its 2027-2030 profit estimates by 4% to 10%.

How Do Retail Traders Feel About NIO?

On Stocktwits, retail sentiment jumped to 'extremely bullish' from 'bullish' levels a week ago amid 'extremely high' message volume.

NIO sentiment and message volume as of September 2 | Source: Stocktwits

One user said,“$NIO We basically have our market cap in Cash. So everything NIO Factories, Swap network, IP, Chips you name it. Sales (20BN per year) Delivered car userbase 1.26MM and Chips. Is all worth Nothing? How incredibly Criminal is that?”

View this Stocktwits post

Another user said,“$NIO will be able to buy back all their shares on the Western market with cash on hand.. if they want.  The end game is the same as they'll continue to take market share from competitors IMHO.   NIO has time and money.. $8.4 BILLION last I checked”

View this Stocktwits post

Nio's U.S.-listed shares declined 41% over the past year. 

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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