Semiconductor stocks have been a big beneficiary of the AI boom since 2022. At the same time, they are also prone to escalations in the US-China AI trade war, which dominates headlines and often brings negative sentiment into the market.
One such development happened on December 9, when Reuters reported that U.S. President Donald Trump had allowed Nvidia to sell its H200 processors to China. According to the news, the U.S. Commerce Department was working on the details of the agreement. This agreement would also apply to all other chipmakers. As a result, the broader semiconductor sector is likely to generate positive sentiment going forward.
Here is how Nvidia reacted to the development:
“Offering H200 to approved commercial customers, vetted by the Department of Commerce, strikes a thoughtful balance that is great for America”
Despite this deal, China will still not have access to the latest Blackwell and Rubin chips that Nvidia makes. In this way, the U.S. government appears to have struck a balance between continuing trade with China and denying it access to state-of-the-art technology.
Here is how Donald Trump announced the deal on the Truth social media platform:
“We will protect National Security, create American Jobs, and keep America’s lead in AI. NVIDIA’s U.S. Customers are already moving forward with their incredible, highly advanced Blackwell chips, and soon, Rubin, neither of which are part of this deal.”
These developments should be seen as supportive of the semiconductor industry in the near term. With that background, we have evaluated the most undervalued semiconductor stocks to invest in and present the list below.
Our Methodology
To identify the 10 most undervalued stocks to invest in, we first screened all semiconductor companies with a market cap of at least $2 billion. We then examined their forward P/E ratios to identify those trading at least 25% below the NASDAQ forward P/E of 26.35. Finally, we selected the top 10 stocks with the best potential upside based on Wall Street consensus and ranked them accordingly. Additionally, we also included data on hedge fund holdings in these companies as of Q3 2025 to provide further insight into investor interest.
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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
10. ON Semiconductor Corporation (NASDAQ:ON)
Potential Upside: 3.63%
Forward P/E: 19.01
Number of Hedge Fund Holders: 45
On December 11, ON Semiconductor Corporation (NASDAQ:ON) announced that it was extending its longstanding strategic partnership with the automotive supplier FORVIA HELLA. Across its advanced automotive platforms, FORVIA HELLA will incorporate ON Semiconductor’s PowerTrench T10 MOSFET technology under the new agreement.
The T10 power MOSFETs are designed to reduce system-level costs for automotive applications while increasing efficiency and power density. They are produced at ON Semiconductor’s state-of-the-art facility based in East Fishkill, New York. With ultra-low conduction and switching losses, ON’s T10 power MOSFETs deliver higher density while maintaining a compact design. By reducing both drain-to-source resistance and gate charge, the shielded-gate power trench MOSFET technology also lowers output capacitance.
The companies intend to address the increasing electrical demands of autonomous driving, safety systems, and electrification by combining FORVIA HELLA’s expertise in automotive systems with ON Semiconductor’s intelligent power solutions.
Executive Vice President of Purchasing at FORVIA HELLA, Sven Hoenecke, pointed out the impact of this collaboration by saying:
“Onsemi’s next-generation MOSFETs are a key enabler for our advanced automotive platforms. This collaboration allows us to offer our customers future-proof solutions with greater efficiency and reliability.”
Group President of Onsemi’s Power Solutions Group, Simon Keeton, highlighted that the extended agreement reinforces ON’s 25-year partnership with FORVIA HELLA.
ON Semiconductor Corporation (NASDAQ: ON) provides intelligent sensing and power solutions. The company operates through the Analog and Mixed-Signal Group, Power Solutions Group, and Intelligent Sensing Group segments. ON Semiconductor is based in Scottsdale, Arizona.
9. Synaptics Incorporated (NASDAQ:SYNA)
Potential Upside: 6.9%
Forward P/E: 14.98
Number of Hedge Fund Holders: 27
On December 11, Barclays’ analyst Thomas O’Malley reaffirmed his Buy rating on the company with a price target of $78. Synaptics Incorporated (NASDAQ:SYNA) enjoys a consensus Buy rating with a median upside potential of 6.9%.
The upside also received a boost on December 5 when Northland Capital Markets initiated coverage of the company with a Strong Buy rating. The coverage highlighted SYNA’s forward earnings estimates, where the research firm expects FY26 earnings of $1.11 and FY27 earnings of $1.92.
While the stock’s 6% YTD decline has kept the shares undervalued, the outlook looks bright if management’s guidance is anything to go by. Even this year, the company’s revenue growth was driven by its Core IoT portfolio, which grew 74% YoY. The growth is expected to continue, as per CEO Rahul Patel, who mentioned the next-generation Synaptics Astra Edge AI processors, which are going to power the next generation of computing at the edge.
“Astra introduces a new class of AI-native silicon, built from the ground up to power the next wave of intelligent devices at the Edge.”
The company’s intentions to target this emerging market are what make it an exciting and undervalued play to bet on. The CEO noted that while the company is currently relying on existing markets, once AI on the Edge becomes the norm, SYNA’s market will expand significantly.
“Our big area of focus right now is to tap into the existing markets. However, on a going-forward basis, as AI… comes to the far end of the Edge… we see our marketplace expanding dramatically.”
Synaptics Incorporated (NASDAQ:SYNA) is a semiconductor equipment maker that develops products like displays, touch systems, biometrics, audio, wireless, and voice processing for various devices. It was founded in 1986 and is based in San Jose, California.
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