Semtech's (SMTC) data center business will be its main growth driver in 2025, benefiting from increased hyperscaler capital expenditures, increasing optical connections, and new greenfield opportunities, Morgan Stanley said in a Monday note.

The company's stock has been impacted by several recent mishaps, and as a result, is trading at a discount compared with other data-center related firms, Morgan Stanley analysts said. However, they added that the market is not giving full credit to Semtech's emerging data center opportunities.

The analysts said they expect the company's Analog and Internet of Things segments to grow modestly after the downturn in the current year, as well as flat growth in 2026. The company could be impacted heavily in its high-end consumer and industrial end markets if a global slowdown occurs, they said.

The analysts said they liked the company's potential after the management transition and acquisition of Sierra Wireless.

Morgan Stanley initiated the company's stock at equal-weight and the price target at $30.

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