BING-JHEN HONG
Despite a recent sell-off in the tech sector, chip stock prices remain high.
While several well-known names have dropped roughly 9% or more over the past month, including NVIDIA (NVDA), Advanced Micro Devices (NASDAQ:AMD), QUALCOMM (NASDAQ:QCOM), Arm (ARM), ASML (ASML) and Micron Technology (NASDAQ:MU), many are still up at least 20% from the start of the year, with NVIDIA shares gaining an astounding 128% year-to-date and Arm soaring 98%.
On the flip side, Intel (INTC) shares have tumbled 38% since the beginning of January, while GlobalFoundries (GFS) and Advanced Micro Devices (AMD) shares have slid 15% and 5%, respectively.
Which brings us to today’s SA Asks investment question: Which chip stocks are undervalued right now?
We asked SA analysts Jonathan Weber, Michael Del Monte, Jere Wang of JR Research and Uttam Dey which ones they saw as undervalued.
Jonathan Weber: Taiwan Semiconductor Manufacturing Company (NYSE:TSM) is, factoring in its excellent market position and dominant scale, as well as its compelling business growth and pricing power, attractively valued right here, trading at 27x net earnings while growing its EPS by 23% this year, for a PEG ratio of just above 1.
Michael Del Monte: Micron Technology (MU) – the pullback post-earnings offers a good buying opportunity for the memory/storage chip designer/manufacturer. With the vast amount of data center demand coming into play over the next few years driven by the hyperscalers building out regional data centers, storage and memory chips should be expected to remain in high demand. Production of Micron’s HBM and DRAM are expected to scale domestically with their new foundries under development.
Jere Wang: Chip stocks based on automotive EV growth have suffered. These include Wolfspeed (NYSE:WOLF), STMicroelectronics (NYSE:STM), Ambarella (NASDAQ:AMBA), and ON Semiconductor (NASDAQ:ON). They are all rated with at least “B” range valuation grades by Seeking Alpha Quant. Recent results by Texas Instruments (NASDAQ:TXN) suggest the broader analog market could have bottomed out. However, Tesla’s (TSLA) weak earnings performance suggests assessed undervaluation in auto chips stocks could persist in the near term.
Uttam Dey: As the AI proliferation train continues and enters end-user markets via smartphones, PCs and devices, Advanced Micro Devices (AMD) and QUALCOMM (QCOM) still look undervalued, given the strong double-digit growth outlook. Plus, the global race to design down on process nodes continues to benefit Taiwan Semiconductor (TSM), which still looks cheap given its 28x forward earnings.
