Energy and EV stocks continue to be in focus as Donald Trump signs a bunch of executive orders that will have far-reaching impacts on many industries. He even revoked an executive order related to AI, though it addresses a matter that may not directly impact a company’s sales in the near term. AI stocks are going under the radar for a few weeks but with earnings season about to get into full gear, we may not have the same opportunities in a couple of weeks that we have now.
Many of the chip stocks continue to stay undervalued. The main reason is the lack of demand in the niche industries that these companies serve. But this demand will eventually shift at some point in 2025, which is what makes them so attractive to consider at this point.
We came up with 10 stocks that we believe are undervalued, near their 52-week lows, and present good investment opportunities. To come up with the 10 undervalued chip stocks that are near 52-week lows, we only considered stocks with a market cap of between $10 billion and $200 billion that hit their 52-week lows recently.
Close-up of Silicon Die are being Extracted from Semiconductor Wafer and Attached to Substrate by Pick and Place Machine. Computer Chip Manufacturing at Fab. Semiconductor Packaging Process.
10. Micron Technology Inc (NASDAQ:MU)
Micron Technology sunk on its most recent earnings report after the company gave weak guidance for the ongoing fiscal first quarter (Dec-Feb). The reason cited by the management was the weakness in consumer-centric markets, something that could also negatively impact the second quarter. As a result, Micron stock plunged 13% in after-hours trading on the day of the announcement last month.
Micron Technology’s 52-week low is $79.15, a level hit in February last year. Since then, the stock has come very close to testing this level 3 times, bunding back strongly on all occasions. This would suggest there is some inherent value in the company’s stock at these levels. After the recent plunge in stock price, the stock is already back at almost the same levels as before the announcement.
This strong surge is what gives us the confidence that Micron’s troubles are short-term and investors are willing to ignore them. Anyone who listened to Sanjay Mehrotra on the earnings call would share this sentiment:
While consumer-oriented markets are weaker in the near term, we anticipate a return to growth in the second half of our fiscal year. We continue to gain share in the highest margin and strategically important parts of the market and are exceptionally well positioned to leverage AI-driven growth to create substantial value for all stakeholders.
Semiconductors are a cyclical industry so downturns are expected. However, if the second fiscal half-year is going to bring a boom for Micron, the time to take a position in the stock is now, even if the stock is already back over 33% from its 52-week lows.
9. Texas Instruments (NASDAQ:TXN)
When the CHIPS ACT was introduced by the Biden government in Aug 2022, Texas Instruments was considered one of the biggest beneficiaries. The company doubled down on expansions on the back of this government support and built capacity it wouldn’t even need in the next 5 years. This didn’t sit well with some investors and the company even had to deal with an activist investor along the way. More than two years later, the company’s stock price stands exactly where it was when the legislation was introduced.
The stock’s returns since 2021 are dismal. The company’s management has to take part of the blame, as it prioritized expansions at the expense of shareholder value. The long-term value generated by the company’s plans is clearly not being respected by the shareholders. This could change soon though. Donald Trump’s Secretary of Commerce pick has made clear that the CHIPS ACT will continue during the Trump government. There is a concern that the scheme may be paused for reconsideration. Intel and Samsung are two companies that have fared even worse than TXN and don’t have a very optimistic outlook. So the money may be diverted to companies that can use it better.
TXN has so far received $1.6 billion under the CHIPS ACT and if that continues, the company won’t have any issue materializing its grand expansion plans. The company is building 4 fabs in Sherman Texas, the first of which will be production-ready this year. When the effects of that trickle down to the bottom line, investors will be happy to price in the next 3 fabs as well, and with it, a sizable chunk of the future growth too, making it an attractive buy at these levels.
8. Applied Materials (NASDAQ:AMAT)
Applied Material investors had a strange 2024. The stock shot up over 70% in the first half of the year and then lost it all by the end of December. The cyclicality of the sector was at play and investors didn’t like it one bit.
2025 has started on a brighter note though. The stock recently received an upgrade from KeyBanc analysts. The rating was upgraded from Sector Weight to Overweight while the price target was moved to $225. The bank stated improving investor expectations as one reason for the upgrade. The market conditions are also expected to ease off for some of the companies in the sector, and AMAT is one of those.
KeyBanc also expects 2025 wafer fabrication equipment spending to be up by 8% compared to the 2024 levels, reaching $108 billion. This sets up the company well for an impressive 2025, though investors would love to have reduced volatility this time around.
7. Monolithic Power Systems Inc (NASDAQ:MPWR)
Monolithic Power Systems is 14% above its 52-week lows, which it hit in November last year. The company announced a weak Q3 performance which resulted in a significant correction in the stock. For many, this was a buying opportunity and with the price trading sideways for the most part of the last two months, the opportunity is still there for the taking.
MPWR created its unique economic moat by targeting efficiency in the power management chip market. It did so by adopting higher power density in its chips. This niche approach has helped it carve out a small portion of the market for itself even when it cannot compete with major semiconductor players on all fronts.
While other semiconductor manufacturers create separate equipment for each component in a chip, MPWR integrates everything on a single design, thus reducing the switching and conduction losses as a result of shortened electric paths. The company also operates on a lean model by outsourcing its manufacturing to companies that specialize in modern semiconductor manufacturing technologies. In this way, the firm can focus on its core niche technology, which is what has helped it drive nearly 245% returns in the last 5 years, despite the stock currently trading at two-thirds of its all-time highs!
6. Skyworks Solutions Inc (NASDAQ:SWKS)
Skyworks Solutions is a semiconductor products manufacturer that operates in all the major economies of the world. The company makes products like antennas, automotive tuners, digital radios, detectors, modulators, and amplifiers among many other products. Its end markets include aerospace, automotive, defense, entertainment, medical, and industrial sectors.
Skyworks often makes it to the news in relation to Apple Inc, as it is one of the suppliers for the tech giant. The stock spent most of the second half of last year in a downtrend on the back of weakness in its smartphone division. It also lost market share to Qualcomm once the broader market recovered. The stock’s underperformance is fully justified as it struggles to keep up with its competitors in almost all of its segments. Despite a smartphone market that showed the best growth in 5 years, the company’s growth was relatively muted. Its Apple-related business, as well as its Android business, isn’t growing as well as investors would hope.
Having said all the above, the stock is pricing in all of these headwinds that the company is dealing with simultaneously. The average analyst target price of $96.27 is still above the current share price, which means any positive trigger could start a bull run as analysts revise their estimates.
5. Qualcomm (NASDAQ:QCOM)
Fresh off its court victory against ARM Holdings, Qualcomm stock is already up 7% YTD. Over the course of the last 6 months though, the stock has shed nearly 28% of its value, ending up quite close to its 52-week lows hit in February last year.
There are multiple reasons for this downturn. China is one, and with a semiconductor technology war continuing to stay in focus, that problem isn’t going away any time soon. The other one is Apple, a big client that intends to completely phase out the use of Qualcomm modems within the next 2 to 3 years.
These two problems have brought the stock close to its 52-week lows, giving investors an opportunity to load up on the stock. The worst seems to be priced in and with the new launches expected to add to the company’s topline in 2025, a recovery in the stock price could just be around the corner.
4. Intel (NASDAQ:INTC)
Intel stock continues to be volatile, though the long-term downtrend has destroyed most of the shareholder value. The company is almost always in the news for negative reasons. Most recently, it was the ouster of CEO Pat Gelsinger that has caused investors a lot of grievances. Intel’s long-term resurrection plan wasn’t going anywhere and the board had to do something quickly. In the end, the CEO had to pay.
Amidst all these negativities, the stock is reeling close to its 52-week lows. Expectations from the company are low. Investors are content when there is no negative news. With Q4 earnings just around the corner, the company’s restructuring and even a potential sale would be talked up again.
In the previous quarter, only the Data Center and AI segment and the Network and Edge segment showed growth. Everything else went downhill, including the 44% decline in Altera. With the company cleaning up its books in the third quarter, it is quite possible that the stock has already bottomed out. 2025 could be a great year for the stock considering how low it has gone in the last year.
3. NXP Semiconductors (NASDAQ:NXPI)
NXP Semiconductors is another semi-stock that is poised for a rebound in 2025. The stock was doing quite well in the first half of the last year until it got hit by the cyclical nature of the industry. The company continues to boast a strong balance sheet and profits, both of which will inspire investor confidence as we progress into the year.
The company’s Q4 guidance fell short of expectations, so a bad Q4 is already priced in. Moreover, the management itself claimed it foresaw an improving market in the second half of the year, which never materialized. As a result, the stock has really taken a beating. It currently trades at about 7% above its 52-week lows, an ideal buying point assuming the stock has all the bad things priced in.
2. ON Semiconductor Corporation (NASDAQ:ON)
ON Semi is just within 3% of its 52-week low, presenting a compelling investment opportunity to investors. The stock is down 24% in a year, and understandably so. It is another victim of the slow industrial and automotive end markets. But it has a lot of things going well for it.
The company’s business model is one example. The firm is set to be a future industry leader with its sensors and power management solutions quite liked by the two main industries it targets. The company’s management is also focused on long-term growth, which is why they don’t use too many buzzwords to prop up stock sentiment.
The firm’s previous earnings report disappointed with a 19% YoY revenue decline, with the industrial segment leading most of the losses. This slump will be recovered when the industry dynamics shift again. What will then help the company most is the improving gross margins. Moreover, once the company completes the acquisition of the New York plant run by GlobalFoundries, its efficiency will improve too. Ultimately this will bring a massive impact on the bottom line once the automotive and industrial markets pick up the pace again. The stock is a good buy at current levels.
1. Advanced Micro Devices (NASDAQ:AMD)
AMD has nearly halved from its 52-week highs and is hovering around its 52-week lows. AMD has always played second-fiddle to Intel. However, with Intel’s recent decline, the company has become a leader in CPU technology. It now has to fulfill the same role competing against Nvidia in GPUs. So far, the company isn’t doing a good job as the stock price shows.
Things could change as AI infrastructure costs become an issue for companies. Nvidia has the better technology at a much higher price tag. AMD makes weaker GPUs that are more cost-effective for small and medium tech companies. As a result, the total cost of ownership of AMD infrastructure for training AI models is quite low, which is why companies opt for its GPUs.
At current levels, the stock is undervalued. It may be true that the market is not confident in AMD’s ability to dent Nvidia’s market share but it doesn’t need to do that to gain a good chunk of future AI spending. Its GPU part of the business will continue to stay relevant as companies continue to set up cheaper training and inference clusters. Moreover, using AMD GPUs in combination with Nvidia GPUs is also something businesses can consider to bring down their total costs. At 24 times its forward earnings estimates, the stock is a steal.
AMD is 19th on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 107 hedge fund portfolios held AMD at the end of the third quarter which was 108 in the previous quarter. While we acknowledge the potential of AMD 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 AMD 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.
