Revenue in the fourth fiscal quarter, which ends in September, is set to come in at around €4.7 billion (US$5.4 billion), Infineon said in a statement on Wednesday. That compares to an average analyst estimate of €4.6 billion, according to data compiled by Bloomberg.

“Our power supply solutions for AI data centers remain in very high demand and continue to be our most important growth driver,” chief executive officer Jochen Hanebeck said in the statement.  

The results may help alleviate concerns about the sustainability of the current AI spending blitz and intensifying competition from China. Investor fears about inflated chip stock valuations deepened a selloff in recent weeks, hitting shares in competitors including Texas Instruments Inc, STMicroelectronics NV and NXP Semiconductors NV, even after they raised their earnings forecasts. Infineon’s stock has risen 69% so far this year.

Infineon said that several customers in the AI data centre sector are negotiating for or have reserved capacity over multiple years. These agreements have a cumulative revenue volume of a high single-digit billion euro amount, the company said. 

“The company looks well positioned to remain the leading player in AI power,” JPMorgan analysts including Sandeep Deshpande wrote in a note before earnings. 

Demand has improved across all business segments, including moderate growth in the automotive sector, according to Infineon. The company confirmed its June guidance of adjusted gross margin for the fiscal year in the low-to-mid 40s percentage range. It expects full-year revenue of around €16.3 billion. 

Third quarter revenue was €4.17 billion, compared to an average analyst estimate of €4.13 billion. The company increased prices for some chips in April and July.

While the car industry is traditionally the most important market for Infineon and its European peers STMicroelectronics and NXP, the companies are now increasingly benefitting from demand for AI infrastructure. Some of their products, which include mature-technology chips that control power flows, can be used in conjunction with advanced AI chips designed by companies like Nvidia Corp and Taiwan Semiconductor Manufacturing Co. 

Hanebeck has sought to expand sales of power chips for data centres to take advantage of the AI boom. 

In February, Infineon said it will boost investment to about €2.7 billion in the current fiscal year, up from a previously projected €2.2 billion. Part of the capital will be used to accelerate the completion of a new power chip fab in the German city of Dresden.

There are signs that China is becoming more self-sufficient in chip production after the US and its allies tightened export controls on sales of chipmaking equipment to the country. A state-backed firm in Shanghai is starting to make immersion deep ultraviolet, or DUV, lithography tools, the Information reported last week.

That threatens the stranglehold on the production of such tools by Dutch company ASML Holding NV. Sales of ASML’s more advanced DUV machines, which are the workhorse of the semiconductor industry, are restricted in China. A Chinese breakthrough would mean local chipmakers are better able to compete with Infineon in key markets like the auto industry.

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