It didn’t take long for AI chip stocks (like ASML, AMD, and MU) to fall so drastically out of favor, with some of this year’s biggest winners now on the receiving end. As demand for AI chips marches ahead, with or without the stocks of the top AI chip plays, contrarians may have one of the best chances to buy the dip since this AI stock rally began more than a year ago.
Indeed, buying into one of the worst sector-based sell-offs in recent memory is never going to be easy. However, if you were bullish on AI a month ago, when AI stocks melted up, you should be even more bullish today now that prices have come down while analyst recommendations and price targets have stayed mostly unchanged.
Therefore, let’s use TipRanks’ Comparison Tool to see where analysts stand on the following damaged chip stocks.
ASML is a European semiconductor equipment maker that just tanked 23% from its peak hit less than one month ago. It’s been a sudden plunge, and while there may be a “double-top” technical pattern in the works, some analysts, like Georges Debbas of BNP Paribas, view ASML stock not just as a great dip buy but as one of his firm’s “top AI calls.” If that’s not a vote of confidence amid a turbulent turn, I don’t know what is. With so many analysts standing by the photolithography machine manufacturer, I’m inclined to remain bullish.
Lower multiple aside, ASML stands out as an even stronger company than it was when shares were trading in the quadruple digits. Recently, ASML stock caught a bid higher as it made “breakthroughs” with a new chip-printing system created in collaboration with a European nanoelectronics organization named imec.
The High Numerical Aperture (high NA) Extreme Ultraviolet (EUV) lithography machine (yes, that’s a mouthful) can reportedly make smaller higher-performance chips. When it comes to chips, it’s either about shrinking the form factor, increasing speed, decreasing power consumption, or decreasing costs of production. The new machine seems to be making progress on all fronts.
In light of the new innovation, I find current levels to be a great entry point for investors seeking a bargain amid the excessive selling. At 40 times forward price-to-earnings (P/E), ASML stock is also much cheaper than it was at the end of Q1 and Q2, when it had multiples of 45 and 46 times, respectively.
What Is the Price Target for ASML Stock?
ASML stock is a Strong Buy, according to analysts, with five unanimous Buys assigned in the past three months. The average ASML stock price target of $1,172.25 implies 37.6% upside potential.
Advanced Micro Devices (AMD)
CPU and GPU maker AMD has been rolling over again, now down 41% from its all-time high hit back in March 2024. Undoubtedly, there’s a bit of unease since that brutal Intel (INTC) quarter sent shivers down the spines of chip stock investors. As AMD finds the right balance between performance and affordability, I am inclined to stay bullish on the stock as it looks to nibble away at Intel’s lunch.
Piper Sandler seems to think Intel’s loss could be AMD’s gain. Undoubtedly, Intel’s mass layoff could set back innovation quite a bit. Meanwhile, AMD still looks as hungry as ever as it readies for its own next-generation line of offerings.
Additionally, recent Blackwell production delays (of around three months) over at Nvidia (NVDA) may also allow AMD a chance to swoop in. The Instinct MI325X GPU, in particular, may just be able to give Nvidia a better run for its money.
In light of recent setbacks of industry rivals, AMD has arguably never looked this good. At 41% cheaper than where it was at its peak, perhaps AMD stock is one of the best bargains to pick up as tech tumbles. Currently, the Street-high price target of $250 per share entails a massive 88% gain from here.
What Is the Price Target for AMD Stock?
AMD stock is a Strong Buy, according to analysts, with 25 Buys and six Holds assigned in the past three months. The average AMD stock price target of $190.63 implies 43.4% upside potential.
Finally, we have memory chip maker Micron, which has the highest implied upside of the names in this piece (currently at 82%). Despite crashing more than 40% in a matter of weeks, analysts don’t seem to be running for the hills like investors. With its share repurchase program recently resumed and 9th-generation (G9) NAND chips going out, I’m not about to turn any less bullish on the name.
Undoubtedly, high-performance memory chips will still be in high demand if the AI boom is to carry on. The company’s latest G9 NANDs are reportedly “73% denser” than the competition, at least according to Scott DeBoer, EVP of Technology and Products at Micron. Indeed, the new G9 offering sets the bar that much higher in a market that’s increasingly leaning toward high-bandwidth offerings to feed AI needs.
With strong free cash flow (FCF) generation of $425 million in the last quarter and the foot on the innovation pedal, the latest stock price implosion seems more like a gift for investors who missed the year-to-date run. After such a pummelling, shares of MU are up just 9% year-to-date.
What Is the Price Target for MU Stock?
MU stock is a Strong Buy, according to analysts, with 25 Buys and two Holds assigned in the past three months. The average MU stock price target of $169.04 implies 82.3% upside potential.
The Takeaway
The chip industry is under pressure, and it doesn’t seem like the latest AI innovations are enough to reignite enthusiasm. Regardless, the following three names seem worth sticking with as their narratives tell a far different story than recent action in their shares.
Whether we’re talking about ASML and its latest breakthrough chip-printing system, AMD’s opportunity to gain share as its rivals face setbacks, or Micron and its latest and greatest G9 NAND chips, each firm has a lot going for it. It’s just that investors don’t seem to care as much anymore when shares are in correction mode.
Of the three names, analysts see MU stock as having the most room to run, with 82% in implied year-ahead upside. And if downgrades don’t start flowing in soon (I see no reason for them to), MU stock may prove to be a steal.
Source: finance.yahoo.com