The semiconductor index (SOX) has been on a tear over the last couple of years. The SOX surged by a whopping 66.95% in 2023, followed by a solid 23.79% in 2024. In comparison, the broader S&P 500 index returned 24.73% and 24.01% in the same period. However, the semiconductor index has fallen by 7.71% year-to-date.
In an interview with CNBC, Glen Kacher, the founder and Chief Investment Officer of Lights Street Capital, underscored his bullishness on chip stocks despite the underperformance in 2025. Kacher remains very bullish on generative AI, which needs the processing power of chips. Kacher said that there is nothing in the tech pipeline as innovative as Gen AI.
Gen AI creates customized answers for the user based on real underlying data. Gen AI has created a massive investment cycle of over $200 billion a year, Kacher said. The ‘Magnificent 7’ companies have been leading capex spenders on Gen AI, and according to Kacher, they will continue to spend big on Gen AI, which is a huge plus for semiconductor companies. The big tech companies are competing intensely over supremacy in Gen AI. Light Street Capital has been shifting a lot of its funds into what Kacher calls the ‘AI 5’.
Semiconductor Valuations are Reasonable Now
According to Kacher, since the summer of 2024, the SOX index has been flat, while the S&P 500 index has returned 15% during the same period. Kacher pointed out that the semiconductor fundamentals have continued to improve in that period. He said, the PE ratio for the SOX index is down by 20% since July 2024, and now stands at 24.5. Meanwhile, the PE ratio for the S&P 500 index is currently 22 and is up 9% in the same period, according to Kacher. Deloitte recently reported that the sales of the semiconductor industry grew 19% in 2024 to $627 billion and expects the sales to go up by over 11% in 2025. According to Deloitte, industry sales could easily surpass the $1 trillion mark by 2030.
According to Kacher investors are irrationally bearish on the semiconductor stocks. He said that the short exposure of hedge funds in the semiconductor stocks is at a five-year high. But given the steadily improving fundamentals and a reasonable valuation, semiconductor stocks could soon be market darlings again as many have a very high upside potential according to analysts.
Our Methodology
We have curated a list of ten semiconductor stocks that have the highest upside potential. For this, we used Finviz screener and set the industry as ‘semiconductor’. We also sorted by market cap and handpicked the stocks with the highest upside potential. Additionally, we have mentioned the hedge fund sentiment for each stock, as of Q4 2024.
Note: All data was recorded on March 19, 2025.
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10 Best Semiconductor Stocks With the Highest Upside Potential
10. Broadcom Inc. (NASDAQ:AVGO)
Upside Potential: 29.32%
Market Capitalization: $919.56 Billion
Number of Hedge Fund Holders: 161
Broadcom Inc. (NASDAQ:AVGO) is a semiconductor giant. It designs, develops, and supplies a wide range of semiconductor and infrastructure software solutions. The company creates products that are used in a wide range of industries. Broadcom Inc.’s (NASDAQ:AVGO) custom ASICs are specialized semiconductor chips designed for specific tasks or applications, rather than general-purpose use, and are likely to be a key driver of the company’s growth. Custom ASICs help the company support the massive scale of data centers that power AI applications today.
Broadcom Inc. (NASDAQ:AVGO) saw solid growth in 2024, with revenue growing 44% year-over-year to $51.6 billion. The 2024 growth was driven by the VMware acquisition in November 2023 and advancements in AI. According to the company, its revenue from AI grew by a staggering 220% year-over-year to $12.2 billion in FY 2024, making up 41% of its revenue from semiconductors. Revenue from AI is likely to make up an increasing portion of the company’s revenue. Broadcom anticipates a substantial market opportunity in AI, projecting an AI-related revenue serviceable addressable market (SAM) of $60-90 billion by 2027. The semiconductor business, especially AI XPUs, is expected to outgrow the non-AI segment in the coming years, with strong growth in AI-driven components like networking chips.
9. Monolithic Power Systems Inc. (NASDAQ:MPWR)
Upside Potential: 32.40%
Market Capitalization: $30.15 Billion
Number of Hedge Fund Holders: 51
Monolithic Power Systems, Inc. (NASDAQ:MPWR) is a global company that makes energy-efficient power electronics using semiconductors. Its products are used in industries like storage, computing, automotive, and communications. Founded in 1997, this company stands out for its expertise in creating small, integrated solutions with advanced technology. With over 4,000 employees worldwide, it focuses on Asia, Europe, and the U.S. The company invests a lot in research and development to stay competitive in the semiconductor industry.
The company expects a flat growth for the enterprise data segment for the year, with growth heavily weighted toward the second half. This is likely to be driven by ramp-ups in hyperscalers, new product launches in AI, and increases in demand from existing customers in AI. Additionally, sectors like memory, optical, and networking are expected to contribute to growth in 2025. It is optimistic about its leadership in AI due to its innovation and first-mover advantage. However, the competitive environment in the AI accelerator space is increasing with other ASIC vendors. Monolithic Power Systems, Inc. (NASDAQ:MPWR) is investing in new technologies. In 2024, the company introduced a silicon carbide inverter for high-powered clean energy applications. The company also plans to introduce other silicon carbide-based applications soon.
8. On Semiconductor Corporation (NASDAQ:ON)
Upside Potential: 36.39%
Market Capitalization: $18.37 Billion
Number of Hedge Fund Holders: 52
ON Semiconductor Corporation (NASDAQ:ON) provides intelligent power and sensing solutions, focusing on the automotive and industrial markets. The company is driving advancements in electrification, AI, data centers, and sustainable energy. The company operates in three segments: Power Solutions Group (PSG), Analog and Mixed-Signal Group (AMG), and Intelligent Sensing Group (ISG). In 2025, the company completed the acquisition of the Silicon Carbide Junction Field-Effect Transistor (SiC JFET) technology business from Qorvo to enhance its power portfolio.
ON Semiconductor Corporation’s (NASDAQ:ON) customer base includes long-term relationships with distributors and direct customers, accounting for significant revenue from major OEMs and resellers. In 2024, sales to distributors made up 53% of revenue, with direct customer sales at 47%. Due to the long-term nature of the company’s contracts, there is visibility in earnings. During the Q4 2024 earnings call, the company highlighted its decision to exit volatile non-core businesses, representing around $350 to $400 million, and reiterated its commitment to high-value segments like SiC and medical. It is also making structural cost-cutting which is expected to take effect in Q2 2025.
7. Advanced Micro Devices Inc. (NASDAQ:AMD)
Upside Potential: 37.78%
Market Capitalization: $172.14 Billion
Number of Hedge Fund Holders: 96
Advanced Micro Devices Inc. (NASDAQ:AMD) is a leader in high-performance computing, providing technology that powers critical services in data centers, PCs, AI, gaming, and edge computing. It offers a wide range of products, including CPUs, GPUs, AI accelerators, FPGAs, APUs, and embedded solutions.
The company is focusing on high-performance hardware and software solutions, collaborative partnerships, and compelling user experiences. Advanced Micro Devices Inc. (NASDAQ:AMD) aims to be a leader in the AI-driven computing era, with a focus on accelerating AI product deployment across cloud, edge, and end devices. The company is also focusing on growing its Data Center segment. Its ongoing investments in AI, software, and strategic acquisitions aim to maintain leadership in the rapidly evolving tech landscape. Analysts expect the company’s Earnings Per Share (EPS) to more than double over the next three years on the back of margin expansion.
The company recently launched the 5th Gen AMD EPYC Embedded Processors. This is likely to drive improvements in performance, efficiency, and flexibility, enabling companies to enhance computing power in embedded systems, edge computing, and AI-driven applications.
6. Arm Holdings plc (NASDAQ:ARM)
Upside Potential: 42.26%
Market Capitalization: $126.18 Billion
Number of Hedge Fund Holders: 43
Arm Holdings, plc (NASDAQ:ARM) designs energy-efficient, high-performance CPUs used in a wide range of devices, from small sensors to powerful supercomputers. Its flexible licensing model helps companies save on development costs, reduce risks, and speed up product launches. Arm’s customers include big companies like AMD, Amazon, Intel, NVIDIA, and Samsung. Its products are used in smartphones, consumer electronics, networking, data centers, automotive, IoT, and embedded devices. The company’s technology is important for AI and machine learning applications, such as generative AI in data centers and live translation in mobile devices. It’s also used in AI-powered automotive systems (like hazard detection) and embedded devices (such as face recognition in smart locks).
Arm Holdings, plc (NASDAQ:ARM) saw a 47% year-over-year revenue increase in Q4 2024, with licensing revenue up 60% and royalties up 37%. The company’s transition to V9, AI integration, and expanding presence in the data center and automotive markets are expected to drive further growth, with licensing and royalties poised to grow significantly. The company expects sustained revenue growth of at least 20% annually through 2026 and 2027.
5. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Upside Potential: 43.17%
Market Capitalization: $747.18 Billion
Number of Hedge Fund Holders: 186
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest independent semiconductor foundry. It focuses solely on manufacturing semiconductor products for other companies. Unlike integrated device manufacturers (IDMs) like Intel or Samsung, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) doesn’t design its own chips. Instead, it produces chips for customers who provide their own designs. This allows the Taiwan-based company to focus purely on the manufacturing process and technology, ensuring high efficiency and quality.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has established long-term partnerships with major tech companies including Apple and NVIDIA. These long-term relationships provide the company with a stable revenue stream. The high barriers for new entrants to compete in the foundry business give it a sustainable competitive advantage, allowing it to retain its leadership position in the foundry market.
The Taiwan-based company plans to invest an additional $100 billion in the US. This investment is intended to enhance AI chip production and diversify manufacturing locations. This move comes in response to increasing tariff threats from the US. TSMC’s colossal investment in Arizona seems to be a strategic move to mitigate potential risks and strengthen its position in the global semiconductor market.
4. NVIDIA Corporation (NASDAQ:NVDA)
Upside Potential: 48.22%
Market Capitalization: $2.87 Trillion
Number of Hedge Fund Holders: 223
NVIDIA Corporation (NASDAQ:NVDA) is a leader in accelerated computing, providing a complete platform that includes GPUs, software, and tools. The behemoth’s technology supports AI, data analysis, scientific computing, and 3D graphics, with solutions for myriad industries. NVIDIA’s GPUs are key to powering AI applications, such as deep learning for autonomous systems. The company’s GPUs are used in over 75% of the world’s top supercomputers. In gaming, NVIDIA enhances experiences for gamers and content creators, and it also invests in AI for autonomous driving.
NVIDIA Corporation (NASDAQ:NVDA) is poised for continued growth, driven by its leadership in AI infrastructure, data center solutions, and gaming technology. According to the company, its technology has long-term usability. The company’s revenue has more than doubled in each of the last two fiscal years. Its bargaining power is evident in its operating margin which has expanded to a stellar 62.4% in 2024. Analysts expect the company to continue to grow at a blistering pace. The company’s revenue is expected to grow at 23.7% annually over the next 4 financial years. The stock is trading at a mouth-watering forward PE of 20.5x.
3. Marvell Technology Inc. (NASDAQ:MRVL)
Upside Potential: 63.86%
Market Capitalization: $60.46 Billion
Number of Hedge Fund Holders: 105
Marvell Technology Inc. (NASDAQ:MRVL) designs and supplies semiconductor solutions focused on high-speed data infrastructure. Its products serve industries like cloud computing, telecommunications, automotive, industrial, and consumer electronics. Marvell Technology Inc. (NASDAQ:MRVL) is heavily focused on the cloud market, helping data centers and storage networks improve bandwidth and reduce delays. It also supports the transition to 5G networks with products that enhance both wireless and wired performance.
Marvell Technology, Inc. (NASDAQ:MRVL) reported $5.77 billion in revenue for the previous fiscal year, with revenue rising 4.71% year-over-year. The company displayed solid profitability with an EBITDA of $1.35 billion. On March 6, Loop Capital upgraded the stock to Buy with a price target of $110. The firm said that the chip company’s post-earnings sell-off of 20% presented a buying opportunity. The drop presents an opportunity to buy a quality name at a deep discount, according to Loop Capital analyst Gary Mobley. In his research note, he recommended that artificial intelligence (AI) will remain a meaningful tailwind for the semiconductor stock moving forward.
2. Astera Labs Inc. (NASDAQ:ALAB)
Upside Potential: 78.55%
Market Capitalization: $11.17 Billion
Number of Hedge Fund Holders: 51
Astera Labs Inc. (NASDAQ:ALAB) is a global semiconductor company that provides high-performance connectivity solutions for cloud and AI infrastructure. Its products help solve data, network, and memory issues in large-scale cloud and AI systems. Its main offering is the Intelligent Connectivity Platform, which includes high-speed hardware and software called COSMOS to manage and optimize systems. It primarily targets hyperscalers, large cloud service providers like Amazon, Microsoft, and Google, that need efficient infrastructure for handling massive amounts of data.
Astera Labs Inc. (NASDAQ:ALAB) achieved a record revenue of $141 million in Q4 of 2024, a 25% increase from the previous quarter and a whopping 179% year-over-year growth. The company reported $396 million in total revenue for 2024, marking a 242% year-over-year growth. It also reported a non-GAAP gross margin of 76.6% for the year. The company anticipates a breakout year in 2025 with significant growth from all of its four product families. It plans to expand its product portfolio with differentiated hardware and software solutions across multiple protocols. It aims to capitalize on the growing market for high-speed connectivity in AI infrastructure and expects the market opportunity for its products to grow substantially through 2028, potentially reaching a $12 billion market.
1. Credo Technology Group Holding Ltd. (NASDAQ:CRDO)
Upside Potential: 79%
Market Capitalization: $7.94 Billion
Number of Hedge Fund Holders: 43
Credo Technology Group Holding Ltd. (NASDAQ:CRDO) is a leader in secure, high-speed connectivity solutions that address the growing data generation and bandwidth needs of the data infrastructure market. Its innovations focus on reducing system bandwidth bottlenecks while improving power efficiency, security, and reliability. Its products cater to optical and electrical Ethernet applications in markets such as 100G, 200G, 400G, 800G, and emerging 1.6T speeds.
Credo Technology Group Holding Ltd. (NASDAQ:CRDO) achieved record revenue in both Q4 of 2024 ($60.8 million) and for the full fiscal year of 2024 ($193 million), driven largely by AI deployments. The company’s solutions, including Active Electrical Cables (AECs), Optical DSPs, Line Card PHYs, and SerDes IP, were key in supporting AI workloads across data centers, according to the company. 75% of Q4 revenue came from AI workloads, and the company expects a significant increase in AI-driven revenue growth by fiscal 2025. The company said in its Q4 2024 earnings call that the increasing need for higher-density connections in AI networks is likely to drive further growth for the company’s AEC solutions. The company is also working on next-generation platforms that will allow for even more AEC connections per GPU.
While we acknowledge the growth potential of CRDO, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CRDO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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