US semiconductor stocks are getting hammered after the Chinese launched an AI model that has many questioning United States dominance in the AI space. China is currently facing restrictions on importing state-of-the-art semiconductor equipment needed for AI training. The launch of DeepSeek AI despite these restrictions is an eye-opener for Western tech companies, and the investor sentiment is reflecting it.
As market participants scamper to gather more information on China’s progress, we decided to look at stocks that are not only taking a hit from this news but also provide an attractive buy-the-dip opportunity. Against the backdrop of Project Stargate, a US government initiative to pump private sector investments into AI infrastructure, these companies also offer a potential multi-bagger opportunity.
Usually, it is the low market cap companies that become multibaggers. However, the failure rate when betting on these companies is quite high. We therefore chose companies with a market cap between $10 and $25 billion. In this way, our list contains businesses that are already established and will thrive on the boost provided by Project Stargate while successfully managing any headwinds. We believe the downside to these stocks is minimal because of the already sound fundamentals of these companies.
10. Ciena Corporation (NYSE:CIEN)
Ciena Corporation makes networking equipment for multiple industries together with providing services and software support. In the context of recent AI developments, the company sells fiber optics to connect data centers. The stock is down 15% today.
Data centers are evolving and we could soon have multiple data centers networked together in small spaces. This would be similar to how computers needed their own big rooms but we now have them in the palm of our hands. Nvidia CEO Jensen Huang recently claimed that a data center could be the new unit of computing. He was referring to how in the future, data centers would be connected together. This ‘connection’ is where Ciena Corporation’s networking expertise comes in.
CIEN is already up 11% this year and this optimism could continue as further AI investments continue to pour in. The stock was over $1000 two and a half decades ago at the peak of the dot com bubble. If the euphoria returns, similar levels can’t be ruled out.
9. Celestica Inc. (NYSE:CLS)
Celestica Inc. is a provider of connectivity and cloud solutions to customers across North America, Asia, and Europe. Like many other companies, it offers hardware, software, and services solutions to generate revenue. The company’s stock has nearly quadrupled in a year but there’s renewed optimism now that AI is in focus again. After today’s developments, it is available at a 12% discount.
The company’s growth is unlikely to slow down before 2027. The aggressive investments in data centers by Big Tech companies and now through Trump’s new Project Stargate program can not only sustain the company’s impressive 20% growth rate but could even accelerate it.
The only major risk associated with the stock is that 25% of its FY23 revenue came from just one customer while the top 10 customers generate 64% of the company’s revenue. This heavy dependence on a few customers could backfire, though the management is proactive and may well have already worked out a diversification plan. We will find out when the next earnings report comes out.
8. Fabrinet (NYSE:FN)
Fabrinet is a critical component of the semiconductor manufacturing supply chain. The company makes advanced optical products for the industry in addition to electro-mechanical like modulators and switches among others. Currently, the stock is trading down 17%.
The company’s recent success has come on the bank of Nvidia’s success in AI, as the firm makes certain optical cables for the GPU maker. This partnership is expected to drive future growth as well. The management’s confidence can be judged by the fact that it is about to break ground on its 10th building, which is twice the size of the one they are building at the moment. This shouldn’t concern investors as the management has a sound strategy for expansion, not starting a new project until the previous one is at more than half the capacity.
Apart from the above, the company continues to buy back stock, has decent cash flow to fund expansion, and is debt-free! If Project Stargate goes ahead, Fabrinet could be a massive beneficiary.
7. Astera Labs (NASDAQ:ALAB)
Astera Labs is a semiconductor company that manufactures and supplies purpose-built connectivity solutions for AI and cloud infrastructure. The company is set to be a beneficiary of the increased spending by hyperscalers as a result of Project Stargate.
ALAB not only collaborates with Nvidia but also has key partnerships with Micron, Intel, and AMD. Its latest product, the Scorpio Smart Fabric Switch, specifically targets cloud AI infrastructure and could be a key part of all future data center installations. In fact, ALAB’s products, especially the P-series switches, are an integral part of Nvidia’s Blackwell line of GPUs.
The only thing that investors need to keep an eye on is the company’s reliance on a handful of companies for a major portion of its revenue. Only 3 companies account for 72% of the company’s revenue, which is a high-concentration risk. The stock is down 15% during trading today.
6. STMicroelectronics N.V. (NYSE:STM)
STMicroelectronics N.V. is a semiconductor developer and supplier operating in analog, microcontrollers & digital ICs group, MEMS & sensors group, and automotive & discrete group segments. The stock was down over 2% during pre-market trading.
The cyclical nature of the industry has meant that the stock is now down 44% in one year. 2025 prospects look better though as the company focuses on increased sales and margin expansion. A re-rating resulting from this would help the company outperform the S&P 500 this year.
TD Cowen downgraded the stock to Hold recently but the stock is already trading at the $25 downgraded price target that the research firm assigned it. Any dip can therefore be considered a buying opportunity, though the semiconductor industry’s headwinds remain a concern.
5. Global Foundaries Inc. (NASDAQ:GFS)
Global Foundaries Inc. is a semiconductor foundry that develops a wide range of semiconductor chips by using advanced technologies. It produces mobile application processors, network processors, power management units, and other semiconductor devices.
The company’s stock is down over 3% in pre-market trading. A disappointing year of trading has seen the stock down 30% mainly due to concerns about its growth. Apart from the Smart Mobile Devices segment, growth prospects are limited for the company. However, it continues to be a key beneficiary of the CHIPS ACT and with the US government about to double down on AI spending through Project Stargate, there could be more money flowing through the company.
One weakness of the company is that it struggles to compete when it comes to advanced nodes, meaning a lot of future growth in data centers may be out of reach for the company. GFS operates in the 12nm technology market while most of the industry operates in a range from 5nm to 16nm. Most of this downside could already be priced into the stock though.
4. Credo Technology Group Holding Ltd (NASDAQ:CRDO)
Credo Technology Group Holding Ltd is a provider of high-speed semiconductor solutions for electrical and optical ethernet applications. The company produces low-power line card PHY, SerDEes IP, HiWire active electrical cables, and other products. The stock is getting hammered today and is down 17%.
Credo can be considered an undervalued stock even at these inflated levels. The company’s expected EPS growth should be further bolstered by improving margins down the line. Moreover, its TAM is likely to be as high as $1 trillion in 6 years time. This stock shouldn’t be ignored just because it is expensive, trading at 165 times forward earnings. There is a good reason the market is giving it that premium.
Investors shouldn’t be in a hurry to build a massive position in the stock though. It has run up 270% in a year so the current struggles on the back of DeepSeek AI developments could help bring the valuations to more reasonable levels.
3. MACOM Technology Solutions Holdings Inc. (NASDAQ:MTSI)
MACOM Technology Solutions Holdings Inc. provides analog semiconductor solutions for wireless applications. The company has seen improvements in its business in the last year which has resulted in 60% gains during this time, comfortably outperforming the S&P 500. Today, however, the stock is down over 13%.
MTSI continues to be a strong stock for 2025. It enjoys the ‘Trusted Foundry’ status from the Department of Defense, which not only implies that the company’s manufacturing processes and products are top-notch but also puts it in a favorable position if the government decides to spend in this sector.
Apart from AI, the firm also benefits from exposure to quantum computing. While this technology is still far away from commercialization, MTSI could in the future become a key supplier of equipment to firms that scale quantum computing. For now, AI and data centers are enough of a reason to invest in the company.
2. ASE Technology Holding (NYSE:ASX)
ASE Technology is involved in the testing, packaging, and manufacturing of various semiconductor equipment. It is a Taiwan-based company that also produces substrates and offers software and management services to various industries. The company’s stock is down 5% today.
ASX’s services to the semiconductor industry are what is usually referred to as Outsourced Semiconductor Assembly and Test (OSAT). Despite a struggling environment for such companies, ASX stock gained 14% in the last year. In Q3, the company reported a 10% YoY income growth with a 4% revenue growth. It enjoys better margins than its peers, which is what helps its stock’s stability during tough times.
Apart from the cyclicality risk which most semi-stocks suffer from, ASX has an added geopolitical risk because of its base in Japan. As long as the stock continues to strategically align itself with Taiwan Semiconductor Manufacturing, the geopolitical risk is likely to stay mitigated.
1. Vertiv Holdings (NYSE:VRT)
Vertiv Holdings is an attractive data center play. It designs, manufactures, and services some of the most important components of a data center. The stock is up 177% in a year but is taking a beating today, down 20% at market open.
The dip is a huge opportunity for investors who missed out on the earlier boom. Power management will continue to be the focus for companies building data centers as it is what constrains some of the GPU technology from further development. After the DeepSeeek AI warning, American companies are likely to step up and increase their investments in data centers and Vertiv is an obvious beneficiary of that. Being available at a 20% discount makes it all the more attractive.
The firm is also well-run. It is expected to convert all of its income into adjusted free cash flow, something not a lot of companies can boast of. As long as AI hype doesn’t die down, Vertiv should continue to perform.
Vertiv Holdings is not on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 91 hedge fund portfolios held VRT at the end of the third quarter which was 92 in the previous quarter. While we acknowledge the potential of VRT as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as VRT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
