We recently published a list of 10 Most Oversold Semiconductor Stocks in 2024. In this article, we are going to take a look at where Microchip Technology Incorporated (NASDAQ:MCHP) stands against other most oversold semiconductor stocks in 2024.
The semiconductor industry is a crucial pillar of global technological development, providing essential components for various industries, from consumer electronics to industrial automation. Despite its long-term growth potential and innovation, several semiconductor companies underperformed significantly in 2024. These companies were impacted by internal and external factors such as geopolitical tensions and changing regulatory landscapes. For 2024, even the broader Philadelphia Semiconductor Index (SOX), which tracks the performance of the largest U.S.-traded semiconductor companies, returned 19.2%, lagging behind the S&P 500 Index’s 23% return.
In a mid-2024 CNBC interview, Stacey Rasgon, Managing Director at Bernstein Research, highlighted that U.S. semiconductor companies are at a disadvantage due to these restrictions, potentially limiting their growth and competitiveness in the global market. He also attributed uncertainties in Taiwanese businesses to comments from Mr. Trump, the then-presidential candidate, regarding Taiwan.
Certain sectors within the semiconductor industry also faced weaker-than-expected demand in 2024, particularly in consumer electronics and traditional automotive sectors. Despite strong growth prospects in AI, data centers, and automotive technologies, companies more exposed to legacy industries experienced slower demand, leading to weaker earnings. Deloitte’s 2025 global semiconductor industry outlook described this as a “tale of two markets”: companies in the generative AI chip market outperformed, while those without exposure (such as automotive, computer, smartphone, and communications semiconductor companies) underperformed.
While the long-term outlook for the semiconductor sector remains positive, short-term volatility and external challenges are creating headwinds for many companies. Companies most exposed to geopolitical tensions, regulatory shifts, and supply chain issues are likely to experience continued underperformance.
Our Methodology
To determine the 10 most oversold semiconductor stocks in 2024, we began by shortlisting all U.S.-listed semiconductor companies with a current market price of over $10 to avoid penny stocks. From these stocks we filtered the stocks which posted negative returns in 2024. We then ranked the bottom 10 companies in descending order based on their 2024 performance. Additionally, we included data on hedge fund holdings in these companies as of Q4 2024 to provide further insight into investor interest.
Note: All pricing data is as of market close on February 19.
At Insider Monkey we are obsessed with 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).
A semiconductor wafer at various stages of fabrication, showing the company’s range of expertise.
Microchip Technology Incorporated (NASDAQ:MCHP)
Share price return in 2024: -34%
Number of Hedge Fund Holders: 44
Microchip Technology Incorporated (NASDAQ:MCHP) specializes in manufacturing embedded control solutions, including microcontrollers, mixed-signal, analog, and Flash-IP integrated circuits. The company generates approximately 18%-20% of its revenue from the Data Center & Computing end market. It offers a comprehensive portfolio of data center solutions designed to enhance server storage performance, reliability, and security, while also reducing overall power consumption. These solutions include Flashtec NVMe controllers, 24G SAS technology-based SmartRoc products for storage, and PCIe Gen 5 technology products for high bandwidth and flexibility in data centers.
In 2024, Microchip Technology Inc. (NASDAQ:MCHP) experienced a 34% decline in its share price, mainly due to continued revenue growth pressures. The company faced weaker demand across its end markets, particularly in the industrial and automotive sectors. It also dealt with inventory build-up at customers, as they remained cautious amid a weak macro environment for manufacturing, high interest rates, very short lead times, and an uncertain business outlook.
At the beginning of December 2024, Microchip Technology Inc. (NASDAQ:MCHP) announced a restructuring plan and updated its guidance in response to the excess inventory and overcapacity situation. While the company now expects its December 2024 quarter revenue to be at the lower end of their guidance, they also announced the closure of their Tempe wafer fabrication facility (fab) by September 2025. Although this move will result in $90 million in annual cash savings, it is overall negative for the near-term outlook due to the pressure on the business and the time required to ramp up capacity during recovery periods. The company has seen its share price rise by around 11% so far in 2025.
Overall, MCHP ranks 5th on our list of most oversold semiconductor stocks in 2024. While we acknowledge the potential of MCHP to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MCHP 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 is originally published at Insider Monkey.
