Global market intelligence firm IDC, in its most recent report, projected a 15% growth for the global semiconductor market in 2025, driven by the relentless rise in demand for artificial intelligence (AI) and high-performance computing (HPC). According to their analysts, this surge will be fueled by forthcoming upgrades in key application markets, notably cloud data centers. Further emphasizing the industry’s promising growth outlook, Nicolas Gaudois, head of Asia-Pacific technology research at UBS, stated in a recent CNBC interview that AI-compute will continue to underpin growth in 2025. He observed:
“The 21% growth in the semiconductor market was mostly driven by AI-compute demand while non-AI growth actually declined. In 2025, AI would remain the growth driver with 40% growth but we expect non-AI portion to also grow by 17% due to several factors such as autos and industrial markets growth improving, restocking (customers buying for their inventories) in those markets and also increase in semiconductor content in devices to support edge (on-device) AI.”
Nicolas also suggested that GPU chipmakers and foundries will remain the main beneficiaries of AI demand and will make the most money from it. With the semiconductor space ripe for further growth, we have picked 10 semiconductor stocks that are undervalued and are best placed to benefit from this growth.
A close-up view of a computer motherboard with integrated semiconductor chips.
Our Methodology
To identify the 10 undervalued semiconductor stocks, we carried out thorough research and used stock screeners to compile a list of U.S.-listed companies. Our criteria included a market capitalization of over $2 billion, an expected share price upside of at least 10%, and a Forward PE ratio below 30x. Ultimately, the stocks were ranked in ascending order of their upside potential. These stocks are also popular among elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Lam Research Corporation (NASDAQ:LRCX)
Upside Potential: 14%
Fwd. PE: 23.1
Lam Research Corporation (NASDAQ:LRCX) is a prominent semiconductor equipment manufacturer that supplies wafer fabrication equipment and services to the semiconductor industry. The company’s innovative systems for wafer etching and deposition are crucial for the advanced nodes of semiconductor technology, as they enable the creation of smaller and more efficient integrated circuits for devices.
The increasing demand for high-performance computing and broader AI applications is generating more opportunities for Lam Research Corporation (NASDAQ:LRCX). The company has made significant investments in cutting-edge technologies, such as Gate-All-Around transistor architecture and advanced EUV patterning, which provide a competitive edge over other suppliers. Additionally, Lam Research Corporation (NASDAQ:LRCX) is focused on reducing per-bit costs to enhance the efficiency of existing tools for memory players, thereby creating value for customers.
On January 17, a KeyBanc analyst upgraded the rating on Lam Research Corporation (NASDAQ:LRCX) to ‘Overweight’ from ‘Sector Weight,’ with a price target of $95. According to the analyst, the company is well-positioned to benefit from the AI-driven growth cycle, owing to advancements in memory market technology, particularly in HBM-related offerings. The company’s offerings are expected to benefit from any recovery in the semiconductor market in 2025 and the long-term demand for leading-edge advancements.
9. Applied Materials, Inc. (NASDAQ:AMAT)
Upside Potential: 15%
Fwd. PE: 20.6
Applied Materials, Inc. (NASDAQ:AMAT) operates in a manner somewhat similar to Lam Research, but it has diversified its range of equipment offerings and its customer base. As the world’s largest wafer fabrication equipment manufacturer, Applied Materials is also a leading provider of materials engineering solutions. The company is a direct beneficiary of advancements in AI and the increasing semiconductor content in connected devices. Leveraging its cutting-edge equipment and materials engineering capabilities, Applied Materials, Inc. (NASDAQ:AMAT) is positioning itself to be at the forefront of technological inflections—significant shifts in wafer processing schemes or device architectures. For instance, the company anticipates its transistor and wiring addressable market to expand from $6 billion to $7 billion due to Gate-All-Around (GAA) and Backside Power Delivery (BPD) inflections.
The growth outlook for semiconductor equipment manufacturers is closely linked to the capital expenditure of large foundries and other chip manufacturers. In mid-January 2025, TSMC announced its Q4 2024 earnings results and projected 2025 capital expenditures of $38 to $42 billion, which is a 33% increase over 2024’s capex. TSMC plans to allocate approximately 70% of this total for advanced process technologies, 10%-20% for specialty technologies, and 10%-20% for advanced packaging, testing, mask-making, and related activities. Given its expertise in etching and deposition markets, Applied Materials, Inc. (NASDAQ:AMAT) is poised to capture a substantial portion of this planned expenditure.
Following these announcements from TSMC, the KeyBanc analyst upgraded their rating on Applied Materials, Inc. (NASDAQ:AMAT) to ‘Overweight’ with a price target of $225, highlighting the company’s focus on materials engineering, advanced packaging, and enhanced production efficiency.
8. GlobalFoundries Inc. (NASDAQ:GFS)
Upside Potential: 16%
Fwd. PE: 28.0
GlobalFoundries Inc. (NASDAQ:GFS) is a US-based semiconductor foundry that manufactures integrated circuits for various markets, including automotive, mobile devices, Internet of Things (IoT), data centers, and communications infrastructure. The company is advantageously positioned within the North American semiconductor ecosystem, especially given the recent escalations in chip export restrictions and the US efforts to bring production closer to home.
Before leaving office in January 2025, the Biden Administration imposed new curbs on exports to China and other countries to block China’s access to advanced technology. These restrictions over the past 5-7 years have driven supply chain diversification in the US, bringing substantial benefits to GlobalFoundries Inc. (NASDAQ:GFS).
GlobalFoundries Inc. (NASDAQ:GFS) is also making substantial investments to significantly enhance its production capacity and advance its technology development efforts within the U.S. In November 2024, the company secured $1.5 billion in government funding under the CHIPS and Science Act, contributing to its broader domestic production expansion plan, which totals $13 billion over the next decade. In mid-January 2025, GlobalFoundries Inc. (NASDAQ:GFS) announced a plan to create an advanced packaging and photonics center within its New York manufacturing facility. The overall investment is expected to be $575 million, with an additional R&D investment of $186 million over the next 10 years.
7. QUALCOMM, Inc. (NASDAQ:QCOM)
Upside Potential: 17%
Fwd. PE: 15.0
Next on our list is QUALCOMM, Inc. (NASDAQ:QCOM), a fabless semiconductor company specializing in software, semiconductor designs, patented intellectual property, development tools, and services for the wireless communication industry. The company boasts an extensive portfolio of patents crucial to 5G, 4G, CDMA, and other mobile communications standards, driving significant licensing revenue growth. With approximately 160,000 granted and pending patents across over 100 countries, QUALCOMM, Inc. (NASDAQ:QCOM) holds a strong intellectual property position.
QUALCOMM, Inc. (NASDAQ:QCOM) envisions a $900 billion addressable market and aims to be present in over 50 billion devices by 2030, as outlined in its November 2024 Investor Day presentation. While we cannot comment on the speculations surrounding QUALCOMM, Inc. (NASDAQ:QCOM)’s potential acquisition of Intel, it is noteworthy that the company ended the latest financial year with over $13 billion in cash and equivalents. This robust financial position, coupled with substantial annual cash flow, enables QUALCOMM, Inc. (NASDAQ:QCOM) to pursue strategic inorganic growth opportunities. The stock currently trades at a P/E ratio of 15.0x.
The company is slated to report its next quarterly earnings on February 5, 2025. Anticipating a strong quarter, an analyst from JP Morgan has already placed the stock on ‘Positive Catalyst Watch’. The analyst believes QUALCOMM, Inc. (NASDAQ:QCOM)’s smartphone market will benefit from government subsidies in China. Additionally, the company’s strategic partnership with Samsung is expected to drive further market share gains.
6. NXP Semiconductors N.V. (NASDAQ:NXPI)
Upside Potential: 20%
Fwd. PE: 16.6
NXP Semiconductors N.V. (NASDAQ:NXPI) specializes in designing and manufacturing microcontrollers, processors, sensors, analog chips, and connectivity modules for various applications, including automotive, industrial, mobile, and IoT solutions. The company has always focused on elevating its existing businesses, and 2025 has already witnessed two significant developments. Firstly, on January 5, 2025, it announced the acquisition of Austria-based TTTech Auto in an all-cash deal valued at $625 million. While this acquisition might be relatively smaller in scale, TTTech brings unique safety-critical systems and middleware for software-defined vehicles (SDVs) that will complement NXP’s CoreRide platform. The management at NXP Semiconductors N.V. (NASDAQ:NXPI) is quite optimistic about this acquisition:
“The inclusion of TTTech Auto’s software into the NXP CoreRide solution further strengthens NXP’s automotive value proposition and accelerates the automotive industry’s transformation to software-defined vehicles. NXP CoreRide enables automakers to deploy their best-in-class, differentiated vehicle platforms more efficiently, faster, and safely. Our acquisition of TTTech Auto is the next big step in NXP’s journey to become the leading provider of intelligent edge systems in automotive and Industrial IoT.”
Secondly, NXP Semiconductors (NASDAQ:NXPI) also secured a €1 billion loan from European Investment Bank (EIB) to advance its research, development, and innovation efforts across its broad portfolio of semiconductor solutions. Its positive investment thesis also received a boost from Goldman Sachs as the firm upgraded its rating to Buy from Neutral with a price objective of $257.
5. Amkor Technology, Inc. (NASDAQ:AMKR)
Upside Potential: 28%
Fwd. PE: 19.4
Amkor Technology, Inc. (NASDAQ:AMKR) holds the title as the world’s largest provider of outsourced semiconductor assembly and test (OSAT) services. The company caters to a diverse range of industries, including communication, automotive, industrial, computing, and consumer sectors, providing manufacturing services for products such as smartphones, electric vehicles, data centers, artificial intelligence, and wearables. Amkor Technology, Inc.’s (NASDAQ:AMKR) growth profile is strongly supported by the rapidly evolving sectors of generative AI, automotive electrification, and connected devices. With the ever-increasing demand for chips in these areas, the company is advantageously placed as packaging and testing are critical components of the semiconductor supply chain.
Amkor Technology, Inc. (NASDAQ:AMKR) is prioritizing design engagement with original equipment manufacturers (OEMs) and semiconductor companies to enhance packaging innovation. In October 2024, the company made a strategic move by signing an agreement with Taiwanese foundry player TSMC to collaborate and bring advanced packaging and test capabilities to Arizona. Under this agreement, TSMC will utilize Amkor Technology, Inc.’s (NASDAQ:AMKR) services at its planned facility in Peoria, Arizona, as well as leverage these services for its customers at its Phoenix facility. Amkor Technology, Inc. (NASDAQ:AMKR) is executing its expansion plan effectively, with approximately 11%-12% of its annual sales allocated to expansion capital expenditures.
4. Micron Technology, Inc. (NASDAQ:MU)
Upside Potential: 33%
Fwd. PE: 15.9
Micron Technology, Inc. (NASDAQ:MU) designs, develops, manufactures, and markets memory and storage products, including dynamic random-access memory (DRAM), flash memory (NAND), solid-state drives (SSDs), and High Bandwidth Memory (HBM) globally. The company is well-positioned to capitalize on technological advancements in AI, 5G, autonomous vehicles, and data centers. Following the strong quarterly results announced in December 2024, Company President and CEO Sanjay Mehrotra expressed optimism:
“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.”
Micron Technology, Inc. (NASDAQ:MU) has positioned its High Bandwidth Memory (HBM) products as a key growth driver, with the company anticipating the total addressable market (TAM) for HBM to expand fourfold by 2028, from $16 billion in 2024 to over $100 billion by 2030. The company’s management has reported significant traction for HBM chips, with sequentially doubling HBM revenue in its latest quarter. Buoyed by this success, Micron Technology, Inc. (NASDAQ:MU) has announced a $7.0 billion investment in a new HBM advanced packaging facility, which will be located adjacent to its existing facilities in Singapore and is expected to be operational by 2026.
Additionally, a report from Berstein analysts suggests that Micron Technology, Inc. (NASDAQ:MU) and Samsung could gain an advantage from the new US export rules, as these regulations will further impact Chinese competitors. The US has tightened the rules for certain memory chips, reducing the allowed size from 1z to 18nm, which will render older technologies ineffective and give firms like Micron Technology, Inc. (NASDAQ:MU) and Samsung a competitive edge.
3. Cirrus Logic, Inc. (NASDAQ:CRUS)
Upside Potential: 35%
Fwd. PE: 15.7
Cirrus Logic, Inc. (NASDAQ:CRUS) is a supplier of low-power, high-precision audio and mixed-signal processing solutions for mobile and consumer applications. These solutions include smart codecs, camera controllers, haptic driver and sensing solutions, and boosted amplifiers. The company also has a strong intellectual property portfolio with about 3,940 pending and issued patents worldwide underpinning its competitive positioning.
Building on its audio solutions, Cirrus Logic (NASDAQ:CRUS) recently announced a collaboration with Intel to launch a reference design based on the new Intel Core Ultra processors (series 2) with Cirrus Logic’s high-quality audio solutions. The collaboration will be a win-win for both companies as this will advance Intel’s PC audio technology, delivering enhanced sound quality, low power consumption, and flexible audio options for a wide range of PCs.
2. ON Semiconductor Corporation (NASDAQ:ON)
Upside Potential: 58%
Fwd. PE: 13.9
The second stock on our list is ON Semiconductor Corporation (NASDAQ:ON), boasting a forward P/E ratio of approximately 14.0x. The company is a prominent manufacturer of intelligent power and sensing solutions, primarily catering to the automotive and industrial markets. Its advanced technologies are pivotal in various sectors, including vehicle electrification and safety, sustainable energy grids, industrial automation, and 5G and cloud infrastructure.
Despite facing challenges in 2024, with a roughly 20% year-on-year revenue decline over the first nine months due to slower demand, ON Semiconductor Corporation (NASDAQ:ON) remains strategically well-positioned in the rapidly growing automotive and industrial markets. The company’s total addressable market (TAM) is substantial, estimated at $44 billion, with a notable $16 billion opportunity in electric vehicles. This strong market positioning underpins the company’s long-term growth prospects.
In line with its growth strategy, ON Semiconductor Corporation (NASDAQ:ON) recently completed the acquisition of Qorvo’s Silicon Carbide Junction Field-Effect Transistor (SiC JFET) technology business for $115 million in cash. Simon Keeton, group president and general manager of the Power Solutions Group, emphasized the significance of this acquisition, stating:
“This acquisition further strengthens onsemi’s leadership in power semiconductors by providing disruptive and market leading technologies to our customers to solve their most pressing power density and efficiency problems in AI data centers, automotive and industrial markets.”
1. Axcelis Technologies, Inc. (NASDAQ:ACLS)
Upside Potential: 66%
Fwd. PE: 12.2
Axcelis Technologies, Inc. (NASDAQ:ACLS) tops our list with a notably low forward P/E ratio of 12.2x. This semiconductor equipment company specializes in designing, manufacturing, and servicing ion implantation systems used in semiconductor chip fabrication. Recently, a Craig-Hallum analyst reiterated his Buy rating on Axcelis Technologies, Inc. (NASDAQ:ACLS) with a target price of $105. While he anticipates some market softness in the first half of the year, he expects demand to improve in consumer, automotive, and industrial end markets, which should benefit Axcelis Technologies, Inc. (NASDAQ:ACLS).
The company has projected that new interim final rules from the U.S. Department of Commerce Bureau of Industry and Security (BIS) regarding semiconductor equipment exports to China could potentially reduce its total annual revenue by $20 million to $50 million in 2025. Despite this near-term headwind, Axcelis Technologies, Inc. (NASDAQ:ACLS) has robust growth drivers to support its long-term trajectory. During the Q3 2024 call, management highlighted three key growth catalysts:
“We are well positioned as the market leader in implant for silicon carbide given the breadth of our portfolio and focused investments we’ve made in this market for several years. We remain very excited about the following long-term growth opportunities that lie ahead. First, continued growth in adoption of silicon carbide as a key enabler of electrification, power efficiency and decarbonization. Second, a cyclical recovery in our memory and general mature markets. And finally, penetration of the Japan market where we aim to extend the success we’ve made in Power to other markets within Japan.”
While we acknowledge the potential of ACLS to grow, our conviction lies in the belief that 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 more promising than ACLS 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 Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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