2 Slumping Semiconductor Stocks to Buy This February
Semiconductor stocks have experienced significant growth with the rise of artificial intelligence (AI). However, with the focus shifting to software stocks and uncertainty around demand for AI accelerators, semiconductor firms are facing challenges. Even giants like Nvidia (NASDAQ: NVDA) have seen stagnant stock prices, raising questions about the future of the sector. Yet, where there is uncertainty, there could be opportunity.
Key Points:
- Semiconductor stocks may be affected by DeepSeek and changing AI needs.
- AMD and Lam Research (LRCX) offer great value opportunities while in their own bear markets.
- Shifting demand for AI accelerators presents opportunities for firms focusing on more efficient, custom silicon.
Value in the Semiconductor Sector
The semiconductor space remains rattled by questions surrounding the demand for AI accelerators.
- Despite setbacks for some companies, opportunities still exist for those focused on data centers and efficient, application-specific custom silicon.
- Companies like Broadcom (NASDAQ: AVGO) may perform better in the future compared to others like Nvidia due to strategic investments in these areas.
AMD: A Value Play Amid Slumping Stock
Advanced Micro Devices (NASDAQ: AMD) stock has slumped by 31% in the past six months, now down over 50% from its all-time highs.
- Despite being the number two GPU player, AMD’s strengths are being heavily discounted.
- Data center growth remains strong, and AMD could capitalize on this despite the DeepSeek overhang.
- AMD’s stock is now trading at 23 times forward P/E, which is considered relatively cheap, especially after a 50% drop in price.
Lam Research: A Bargain in Semiconductor Machinery
Lam Research (NASDAQ: LRCX) is another semiconductor stock facing a slump, now down 29% from its all-time highs.
- However, Lam has recently introduced innovations like ALTUS Halo and Akara, which could provide a long-term advantage in the semiconductor machinery sector.
- With a 21.9 times forward P/E, Lam stands out as a value opportunity in the industry.
- Lam Research aims for $26 billion in revenue by 2028, representing a 13% compound annual growth rate (CAGR), and could benefit from increased demand for efficient chips as AI evolves.
Conclusion: Value Opportunities in a Volatile Sector
Despite the slumping stock prices of companies like AMD and Lam Research, both offer potential for long-term growth.
- AMD could outperform in the data center space, while Lam Research is well-positioned to benefit from the next generation of semiconductor innovations.
- With their relatively low valuations and long-term growth prospects, these stocks may provide strong value for investors willing to navigate the current uncertainty in the semiconductor sector.
