Ambarella Inc. ( AMBA ) shares are trading higher on Tuesday after reports emerged that the chip design company is exploring a potential sale.

What To Know: According to Bloomberg, the Santa Clara-based firm has begun working with bankers and has reached out to potential buyers, including industry rivals and private equity firms.

The company, known for its video compression and image-processing chips used in automotive and security applications, has a market value of about $2.6 billion. While the discussions are still in early stages and may not result in a transaction, investors are reacting to the possibility of a buyout at a premium. Ambarella ( AMBA ) has not commented on the reports.

Ambarella ( AMBA ) is led by co-founder and CEO Fermi Wang. The company has recently shifted its focus to "edge AI" products, which now make up about 75% of its sales. The chips enable real-time image recognition close to where video is captured, making them useful in sectors like industrial automation and video conferencing.

The company's revenue remains heavily reliant on one distributor, Taiwan-based WT Microelectronics, which accounts for over 60% of Ambarella's ( AMBA ) total sales. The news of a possible sale comes amid a broader uptick in semiconductor dealmaking, including SoftBank's $6.5 billion acquisition of Ampere Computing and Intel's recent divestment of its stake in Altera.

AMBA Price Action: Ambarella ( AMBA ) shares were up 19.2% at $61.48 at the time of publication, according to Benzinga Pro.

Read Next:

Snowflake Stock Is Rising Tuesday: What’s Going On?

Image via Shutterstock.