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.

8. Qualcomm Inc. (NASDAQ:QCOM)

Potential Upside: 8.39%

Forward P/E: 13.94

Number of Hedge Fund Holders: 63

On December 16, C J Muse of Cantor Fitzgerald maintained his Buy rating on Qualcomm Inc. (NASDAQ:QCOM) and raised the price target from $150 to $185. The research firm’s price target remains well below the $200 median target per CNN’s compilation of 36 analyst ratings.

The company has also announced on December 18 that it completed the acquisition of Alphawave Semi. The acquisition is intended to help Qualcomm enter the data center market, a move it made earlier this year after exiting the market in 2018.

Qualcomm Inc. (NASDAQ:QCOM) continues to surge amid analyst optimism and positive developments. The company’s Snapdragon Cockpit Elite technology will be on display at the CES 2026, according to LG Electronics’ press release on December 10. LG is set to showcase its Qualcomm-powered AI Cabin Platform at the event.

Qualcomm’s technology will enable the AI Cabin to perform all AI calculations on the device without requiring a connection to any external server. This will significantly improve real-time AI assistance. The press release mentioned examples where this technology will be useful. If a driver fails to notice a merging vehicle, they can be quickly alerted by the Qualcomm System-on-Chip (SoC). The lack of a cloud connection also reduces vulnerabilities, such as latency and hacking.

Qualcomm Inc. (NASDAQ:QCOM) develops and commercializes foundational technologies for the wireless industry worldwide. The company is operating through Qualcomm Technology Licensing (QTL), Qualcomm CDMA Technologies (QCT), and Qualcomm Strategic Initiatives (QSI).

7. Skyworks Solutions, Inc. (NASDAQ:SWKS)

Potential Upside: 9.89%

Forward P/E: 13.71

Number of Hedge Fund Holders: 35

On December 11, Thomas O’Kalley of Barclays maintained his Hold rating on Skyworks Solutions, Inc. (SKWS) stock, along with the price target of $88. This price target remains well above the median price target of $75 and offers 31% upside from the current level.

SWKS has struggled since the announcement of the merger with Qorvo (NASDAQ:QRVO), but the stock has been rallying for the past month, and Barclays’ $88 price target may add further to the bullish sentiment. Investors were possibly spooked by the amount of time it may take for the merger to financially benefit the company. The merger is expected to be executed by early 2027, with about $500 million in cost savings expected by 2028-2029. The cash-and-stock transaction is weighing heavily on the stock, as is the risk of regulatory approval.

The regulatory risk stems from the fact that both Skyworks and Qorvo are competitors and significant suppliers for one company: Apple Inc. (NASDAQ:AAPL). A merger would reduce competition in RF components, increasing Apple’s dependence on a single supplier. This reduced competition is generally bad for the end consumer, which is why regulators usually side with companies like Apple in such merger scenarios.

Skyworks Solutions, Inc. (NASDAQ:SWKS) specializes in radio-frequency and analog solutions. These products enable wireless connectivity across industrial applications, automotive systems, and smartphones, among other things. It is based in Irvine, California.

6. NXP Semiconductors NV (NASDAQ:NXPI)

Potential Upside: 15.33%

Forward P/E: 16.86

Number of Hedge Fund Holders: 53

On December 16, Vivek Arya of Bank of America Securities maintained a Buy rating on NXP Semiconductors NV (NASDAQ:NXPI) and raised the price target from $255 to $265. According to estimates from 34 analysts covering the stock on Wall Street, the stock has a median upside target of $265, exactly where BofA’s price target now stands.

Cantor Fitzgerald Research also made some comments on the semiconductor industry on December 16, expecting relative outperformance from NXPI stock. These two positive analyst responses come at a time when investors are fearing negative sentiment as a result of news coming out of Chandler, where the company’s ECHO fab used to manufacture parts for 5G equipment.

According to an NXP spokesperson who spoke to Business Journal on December 13:

“Given the market realities with no outlook for recovery, the RP business no longer fits into the company’s long-term strategic direction. Therefore, NXP has made the decision to ramp down its radio power product line.”

The Chandler facility is expected to close by 2027 after a lack of ROI on investments amid lower-than-expected global 5G deployments. The firm will completely exit the radio power market while scaling down operations at the Chandler fab.

NXP Semiconductors NV (NASDAQ:NXPI) is a designer and manufacturer of semiconductor equipment based in Eindhoven, Netherlands. Its high-performance mixed-signal products are sold globally across markets such as automotive, IoT, mobile, and communication infrastructure.

5. Cirrus Logic Inc (NASDAQ:CRUS)

Potential Upside: 19.66%

Forward P/E: 16.51

Number of Hedge Fund Holders: 25

In a report released on December 12, Thomas O’Malley, an analyst at Barclays, maintained his Hold rating on Cirrus Logic (NASDAQ:CRUS) stock. He also maintained the $95 price target, originally set on November 5, immediately after the company’s Q2 Fy2026 earnings report.

In stark contrast to the above, on December 10, analyst Tore Svanberg of Stifel maintained a Buy rating on the stock, assigning a target price of $150. This bullish sentiment stems from the company’s launch of the CS40L5X series on December 9. This is a closed-loop haptics driver for the automotive industry. Cirrus Logic has traditionally been focused on the smartphone market. But the company is now moving into the automotive market to drive growth, and this product launch is a step in that direction. This move will not only help growth but also reduce reliance on a single sector.

Tore Svanberg believes this move aids the company’s drive to focus on the High-Performance Mixed-Signal (HPMS) segment. The stock fell right after the November 4 earnings announcement. However, with this move, analysts remain upbeat about the company’s growth prospects, even as investors exited the stock immediately after the earnings due to relatively disappointing guidance.

Cirrus Logic (NASDAQ:CRUS) is a fabless semiconductor company that provides low-power, high-precision mixed-signal processing solutions for mobile and consumer applications. The company operates in two main segments, Audio and High-Performance Mixed-Signal (HPMS). It is based in Austin, Texas.

4. Micron Technology Inc. (NASDAQ:MU)

Potential Upside: 20.42%

Forward P/E: 9.48

Number of Hedge Fund Holders: 105

On December 16, Needham raised Micron Technology’s (NASDAQ:MU) price target from $200 to $300, a staggering 50% increase. The firm also maintained the prior Buy rating on the stock. Needham estimates Micron’s tangible book value at $96.15 per share by the fiscal first quarter of 2028, implying a $300 price target with a 3.1x tangible book value multiple.

The price target boost comes as analysts foresee demand comfortably outpacing supply throughout the next calendar year. This demand is also likely to contribute to higher DRAM and NAND prices, helping improve Micron’s margins. Micron’s HBM3E and HBM4 capacity is completely booked for the whole of 2026, with margins comfortably above DRAM averages. These DRAM averages are up 162% YoY, clearly reflecting bullish sentiment around the stock. As a result of this demand, Needham estimates Micron will likely update its 2026 capital expenditure forecasts to $20 billion.

Just a day prior to this, Wedbush analyst Matt Bryson also maintained his Outperform rating on MU, upgrading the price target from $220 to $300. CNN’s analyst estimates show a highest price target of $362, based on 40 price targets. The back-to-back price target upgrades move the stock’s median price target of $280 further above, suggesting Micron is still undervalued according to analysts.

Micron Technology Inc. (NASDAQ:MU) is a semiconductor company that provides memory and storage solutions, both of which have become increasingly important in the high-performance computing era. The company employs over 53,000 people and is based in Idaho, United States.

3. ASE Technology Holding Co. (NYSE:ASX)

Potential Upside: 20.85%

Forward P/E: 18.77

Number of Hedge Fund Holders: 22

On December 9, ASE Technology Holding Co. (NYSE:ASX) reported its unaudited consolidated net revenues for the month of November. ASX continues to prove its stability and strength in the semiconductor industry. Net revenue totaled NT$58,820 million in November, reflecting a 2.3% month-over-month decline. However, it was 11.1% higher than the same month last year in New Taiwan dollar terms.

In U.S. dollar terms, revenue totalled $1,903 million, indicating a sequential decline of 3.9% but a strong year-over-year increase of 15.5%. Despite small monthly fluctuations, these numbers demonstrate a steady annual growth, strengthening ASE Technology Holding’s position in the semiconductor sector.

The firm’s ATM (assembly, testing, and materials) segment delivered NT$36,082 million in revenue in November. ATM segment’s revenue was slightly up by 0.1% from October in NT$ terms, but saw a strong year-over-year growth of 23.6%. In US dollar terms, the ATM segment posted revenue of $1,167 million, a 1.5% decline from October. It showed a significant 28.5% year-over-year growth. ASX’s November performance highlights solid demand for its assembly and testing business. This segment is contributing substantially to the company’s overall growth trajectory.

ASE Technology Holding Co. (NYSE:ASX) provides semiconductor manufacturing services across Taiwan, Europe, the United States, Asia, and global markets. The company operates in four segments: Testing, Packaging, EMS, and Others. It provides front-end engineering testing, semiconductor packaging, final testing, wafer probing, and interconnect materials production services.

2. Photronics, Inc. (NASDAQ:PLAB)

Potential Upside: 26.6%

Forward P/E: 15.91

Number of Hedge Fund Holders: 27

Photronics Inc. (NASDAQ:PLAB) boasts significant upside after a strong earnings report and back-to-back analyst upgrades. On December 11, D.A. Davidson analyst Thomas Diffely maintained his Buy rating on the stock and raised the price target from $30 to $45. On the same day, Christian Schwab of Craig-Hallum also assigned a price target of $42, along with a Buy rating.

These earnings came as the company continued to ride strong momentum in the last month, resulting in an incredible rally that saw the stock price double in less than a month. On the earnings call, Christian Schwab inquired about the pricing pressure in China. Management replied that it prioritizes its capacity for higher value customers, so if one product faces margin pressure, another is prioritized for production. At the moment, 22nm and 28nm technologies are considered higher-margin and therefore prioritized. Management also confirmed to the analyst that it expects gross margins to stay steady in the near term as it continues to make new investments.

When asked about tariffs and other geopolitical issues, the company mentioned that customers have now become used to supply chain disruptions as a result of these factors and therefore factor them in when placing orders, resulting in improved planning that doesn’t hurt the company as it did before.

Photronics, Inc. (NASDAQ: PLAB) manufactures semiconductor chips. It provides photomasks containing microscopic images of the circuits printed on these chips. The company is based in Connecticut, United States.

1. Silicon Motion Technology Corp. (NASDAQ:SIMO)

Potential Upside: 41.89%

Forward P/E: 18.19

Number of Hedge Fund Holders: 36

On December 15, Craig-Hallum analyst Anthony Stoss maintained his Buy rating on Silicon Motion Technology Corp. (NASDAQ:SIMO). The company now has a median target price of $120, according to CNN’s compilation of 9 analyst ratings, implying 41.89% upside from current levels.

This median price target is close to $125 price target that Craig Ellis of B. Riley Securities assigned on November 13. The stock rallied nearly 20% after that rating, but is now dropping back to the same level as the broader market declines.

Following the announcement above, the company released the SM8388, a power-efficient SSD controller. Its low power consumption, high performance, high capacity, and relatively low cost make it a leading controller in the market. The enterprise-grade security features further add to the controller’s reliability when deployed in enterprise environments.

With the above development, the company now addresses two key bottlenecks facing companies building AI infrastructure: power costs and memory constraints. As AI workloads generate massive amounts of new data, Nearline SSDs become increasingly important. This is an improvement over HDDs, which can’t meet the performance and power-efficiency requirements of these AI workloads, which is why the stock price rose heading into December.

Silicon Motion Technology Corp. (NASDAQ:SIMO) develops, manufactures, and supplies essential semiconductor equipment to the electronics market, including flash controllers and storage solutions. It is based in Hong Kong, with offices in Taiwan and the United States.

While we acknowledge the potential of SIMO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than SIMO and that has 100x upside potential, check out our report about this cheapest AI stock.

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