In this article, we will discuss the 10 undervalued chip stocks to buy today. You can skip our industry analysis and go directly to the 5 Undervalued Chip Stocks to Buy.
The semiconductor market is essential to the advancement in technologies as the chips produced by the industry are used ubiquitously in a wide range of products, including computers, smartphones, tablets, and other electronic devices, as well as in a variety of industrial and military applications. The semiconductor market in recent years has been a rapidly growing and highly competitive industry, with a large number of players that range from large multinational corporations to smaller specialized firms. The market is driven by advances in technology. Some of the key trends in the semiconductor market include the increasing demand for smaller, more powerful devices, the growth of the Internet of Things (IoT), and the rise of artificial intelligence (AI).
Although the semiconductor industry has continued to grow over the past few years, with the total market value amounting to $527.88 billion in 2021, the semiconductor stocks have had a rough 2022, which is reflected in the performance of iShares Semiconductor ETF, down 35% YTD as of December 23, 2022. The rise in interest rates deteriorated the demand environment for chipmakers as discretionary spending on PCs and new devices slowed down, resulting in a period of inventory correction for semiconductor companies.
Since the semiconductor industry is cyclical in nature, a downturn caused by macroeconomic headwinds is not a surprise to many investors. Chip sales rose to $54.5 billion per month in March 2022 but have continued to decline since then as the macroeconomic outlook continued to deteriorate. There are also concerns regarding oversupply in the industry as many chipmakers did capacity expansions as demand boomed during the post-COVID period. During 2018 and 2020, wafer capacity increased by 25%; however, with demand slowing down, the chipmakers are currently dealing with clearing out the excess inventory and maintaining profitability.
Although the near-term market outlook may appear grim, the downturn in the market has provided an opportunity to own solid semiconductor companies at attractive valuations. The fundamental growth trends for the chip market still remain intact, with a rise in EV adoption and advancement in AI and IoT, and the market is forecasted to grow at a CAGR of 12.2% during the period 2022-2029 to $1,380.79 billion in 2029.
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Our Methodology
To come up with a list of 10 undervalued chip stocks to buy, we have selected the top 10 chip stocks that are being recommended by other finance websites in order to understand the consensus opinion of other journalists over chip stocks. We have ranked the stocks in ascending order of mentions by publications over the past three months. Moreover, as a tiebreaker to rank the stocks, we have used Insider Monkey’s hedge fund sentiment data.
10 Undervalued Chip Stocks To Buy
10. ASML Holding N.V. (NASDAQ:ASML)
Number of Recent Mentions: 2
Number of Hedge Fund Holders: 51
ASML Holding N.V. (NASDAQ:ASML) is a Dutch multinational company that specializes in the development and production of advanced technology systems for the semiconductor industry. ASML Holding N.V. (NASDAQ:ASML) is a leading supplier of photolithography systems for the semiconductor industry. Photolithography is a process used to transfer patterns onto a substrate, such as a wafer, using light and a photomask. The company serves a global customer base, including major semiconductor manufacturers such as Intel Corporation (NASDAQ:INTC), Samsung, and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM).
On November 14, 2022, Joe Quatrochi, an analyst at Wells Fargo, increased his price target on ASML Holding N.V. (NASDAQ:ASML) to $665 from $510 while keeping an Overweight rating on the stock. The analyst noted that ASML Holding N.V. (NASDAQ:ASML) offers the strongest secular growth story among the firms he covers.
In addition to ASML Holding N.V. (NASDAQ:ASML), Intel Corporation (NASDAQ:INTC), Texas Instruments Incorporated (NASDAQ:TXN), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) are included in our list of 10 undervalued chip stocks to buy.
According to Insider Monkey’s database, 51 hedge funds owned stakes in the company at the end of the September quarter. Fisher Asset Management held the biggest stake in ASML Holding N.V. (NASDAQ:ASML) at the end of Q3 2022.
Baron Opportunity Fund commented on ASML Holding N.V. (NASDAQ:ASML) in a Q2 2022 investor letter,
ASML Holding N.V. designs and manufactures semiconductor production equipment. It specializes in photolithography equipment, where light sources are used to photo-reactively create patterns on wafers that become printed circuits. ASML is the dominant leader across all types of lithography but, most importantly, is the only company selling equipment for extreme ultra-violet (EUV) lithography, the latest generation technology.
Indeed, because of the stalling out of Moore’s Law, advanced lithography of larger and multi-patterned silicon chips has been critical for leading-edge chip manufacturing and continued improvement in semiconductor chip performance over time. The company is well positioned to continue growing above industry rates as it rapidly adds capacity across its entire business to meet rising industry demand, especially from leading-edge customers continuing to invest to stay ahead of their competitors and drive chip performance forward.
Additionally, the introduction of high-NA EUV technology in the middle of the decade will add another leg to the growth opportunity.
9. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Recent Mentions: 2
Number of Hedge Fund Holders: 52
Founded in 2006, NXP Semiconductors N.V. (NASDAQ:NXPI) is a global semiconductor company that designs and manufactures a wide range of products for use in a variety of applications, including automotive, industrial, and consumer markets. NXP Semiconductors N.V. (NASDAQ:NXPI) is a leading provider of secure connectivity solutions for the automotive industry, including automotive microcontrollers, secure identification, and secure networking solutions. The company has a number of research and development facilities around the world, including in the Netherlands, the United States, and China.
On November 2, 2022, Ross Seymore, an analyst at Deutsche Bank, reduced his price target on NXP Semiconductors N.V. (NASDAQ:NXPI) to $170 while keeping a Buy rating on the company’s stock. According to the analyst, the company reported strong third-quarter results but delivered soft fourth-quarter guidance as the management remains cautious because of weakening demand in consumer-based divisions.
At the end of Q3 2022, 52 hedge funds in Insider Monkey’s database were long NXP Semiconductors N.V. (NASDAQ:NXPI). Citadel Investment Group remained the leading stakeholder of the company at the end of Q3 2022.
8. Microchip Technology Incorporated (NASDAQ:MCHP)
Number of Recent Mentions: 3
Number of Hedge Fund Holders: 45
Headquartered in Chandler, Arizona, Microchip Technology Incorporated (NASDAQ:MCHP) is a global semiconductor company that designs, develops, and manufactures a wide range of microcontrollers, memory products, and analog and mixed-signal integrated circuits (ICs). Microchip Technology Incorporated (NASDAQ:MCHP) microcontrollers are used in a variety of applications, including automotive, industrial, and consumer markets.
On November 3, 2022, Harsh Kumar, an analyst at Piper Sandler, reduced his price target on Microchip Technology Incorporated (NASDAQ:MCHP) to $80 while keeping an Overweight rating on the stock. According to the analyst, Microchip Technology Incorporated (NASDAQ:MCHP) reported a solid second-quarter result and splendid third-quarter guidance in an environment where many analog and broad-based firms are not doing well.
According to Insider Monkey’s database, 45 hedge funds owned stakes in the company at the end of the September quarter. Platinum Asset Management held the biggest stake in Microchip Technology Incorporated (NASDAQ:MCHP) at the end of Q3 2022.
7. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Recent Mentions: 4
Number of Hedge Fund Holders: 89
Founded in 1969, Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global semiconductor company that designs, develops, and manufactures a wide range of microprocessors, graphics processors, and other related products. Advanced Micro Devices, Inc. (NASDAQ:AMD) is a leading supplier of microprocessors for the personal computer (PC) market, including both desktop and laptop PCs. The company’s microprocessors are used in a variety of applications, including gaming, content creation, and productivity.
On November 14, 2022, Tristan Gerra, an analyst at Baird, increased his price target on Advanced Micro Devices, Inc. (NASDAQ:AMD) to $100 from $65 and upgraded the rating on the stock to Outperform from Neutral. The analyst believes that the performance improvement from the Genoa chip will drive incremental market share for AMD in 2023.
89 hedge funds were long on the company’s stock at the end of the third quarter, according to Insider Monkey’s database. Fisher Asset Management had the biggest long position in the company at the end of Q3 2022.
6. Broadcom Inc. (NASDAQ:AVGO)
Number of Recent Mentions: 5
Number of Hedge Fund Holders: 74
Headquartered in San Jose, California, Broadcom Inc. (NASDAQ:AVGO) is a global technology company that designs, develops, and manufactures a wide range of semiconductor and infrastructure software products. Broadcom Inc. (NASDAQ:AVGO) is a leading supplier of semiconductor and infrastructure software products for the data center, networking, software, and broadband markets.
On December 9, 2022, William Stein, an analyst at Truist, increased his price target on Broadcom Inc. (NASDAQ:AVGO) to $662 while keeping a Buy rating on the stock. Contrary to pessimistic data points of the industry, the analyst believes that the company reported a good fourth-quarter result along with an optimistic outlook for the next quarter. According to the analyst, all of the company’s end markets performed well, and its strong cash flows enabled a sizable 12% dividend hike.
As per Insider Monkey’s database, 74 hedge funds owned stakes in Broadcom Inc. (NASDAQ:AVGO) at the end of the third quarter. Fisher Asset Management remained the leading stakeholder of the company at the end of Q3 2022
Here is what Carillon Tower Advisers specifically said about Broadcom Inc. (NASDAQ:AVGO) in its Q2 2022 investor letter:
Tech stocks, including Broadcom Inc. (NASDAQ:AVGO), were one of the hardest-hit sectors due to fears over a weakening macroeconomic environment. Broadcom, however, outperformed semiconductor peers as its end-market exposures provided relatively more defensive characteristics.
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Disclosure: None. 10 Undervalued Chip Stocks To Buy is originally published on Insider Monkey.
