3 Beaten-Down AI Chip Stocks to Consider Buying in the Sell-Off
Chip stocks have taken a beating this week. A rotation out of high-flying technology names -- driven by mounting doubt about whether the industry's enormous spending on artificial intelligence (AI) will ever pay off -- has dragged the whole chip sector lower, and Friday brought more selling.
Sell-offs like this rarely bother to separate strong businesses from weak ones, which is exactly why they can create opportunities.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Three beaten-down chip stocks stand out as worth a look right now: Nvidia (NASDAQ: NVDA), ON Semiconductor (NASDAQ: ON), and Intel (NASDAQ: INTC). Each is down for its own reasons, and each comes with meaningful risk. But for investors who can stomach the volatility, the weakness may be a chance to buy quality at a discount.
1. Nvidia
Start with the most obvious name. Nvidia stock has fallen about 18% from its 52-week high as of this writing, slipping back toward $190. Yet the business behind it has rarely looked better. In its fiscal first quarter of 2027 (the period ended April 26, 2026), revenue jumped 85% year over year to $81.6 billion, and data center revenue -- the heart of its AI business -- climbed 92% to $75.2 billion. And management guided for second-quarter revenue of $91 billion, a sign the growth isn't slowing yet.
What makes the pullback interesting is the valuation. After the slide, Nvidia trades at about 29 times earnings -- well below the premium multiple it carried for most of the AI boom. For a company still growing this fast, with a gross margin near 75%, that isn't a demanding price.
Of course, the stock's risk is the one weighing on the whole sector: if AI spending cools, Nvidia's blistering growth could normalize quickly.
2. ON Semiconductor
ON Semiconductor didn't just get caught in the downdraft -- it got hammered, falling more than 23% on Friday, to around $91, as of this writing. The trigger was its own news: a $7 billion all-stock deal to buy Synaptics (NASDAQ: SYNA), its largest acquisition ever, meant to push deeper into edge AI and so-called physical AI (intelligence built into everyday devices).
Because it's an all-stock deal, it dilutes current shareholders, and investors seemed to balk at the price and the integration risk.
Look past the one-day drop, though, and the underlying business is turning a corner. After a long slump in demand from automakers and industrial customers, onsemi's first-quarter revenue (for the period ended April 3, 2026) rose 5% year over year -- its first growth in several quarters -- while its AI data center business more than doubled.
"We exceeded expectations as demand strengthened through the quarter and we have moved beyond the cyclical trough on a path to recovery," CEO Hassane El-Khoury said in the company's first-quarter earnings release.
The stock trades at a price-to-earnings ratio in the 60s. But that figure says more about how depressed profits are at the bottom of the cycle than about a stretched valuation. If the recovery holds, today's price could look cheap.
3. Intel
Intel has been the sector's great turnaround story.
The stock has rocketed from a 52-week low near $19 to a high above $141 over the past year as new CEO Lip-Bu Tan's overhaul gained traction -- and this sell-off has only nicked it, with shares easing to around $128.
And the business behind the run-up is improving: first-quarter revenue rose 7% to $13.6 billion, non-GAAP (adjusted) earnings per share came in at $0.29, and Intel reportedly landed Tesla as the first major customer for its most advanced 14A manufacturing process -- a marquee win for its struggling foundry business.
The catch is that Intel is still profitable only on a non-GAAP basis, and its foundry operation lost $2.4 billion in the quarter -- even as its revenue grew. Additionally, after a run this big, the stock already prices in a turnaround that is only partway done.
Of the three, it may be the most speculative -- a bet that Tan can keep the comeback going, not a cheap stock backed by proven profits.
The bottom line
Ultimately, none of these three stocks is low-risk, and the sell-off that dragged them down could have further to run if the market's doubts about AI spending deepen. But some carry more risk than others. Intel asks investors to trust a turnaround that is still unproven and still losing money where it matters most. And ON Semiconductor pairs a genuine cyclical recovery with a big, dilutive acquisition that has yet to prove its worth.
Nvidia, by contrast, looks like a fast-growing, dominant business whose shares have fallen below the intrinsic value of the underlying business. Sure, it's still a high-risk stock tied to the same AI cycle as the others. But of these three, it's the one I like most.
Should you buy stock in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn't one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $382,359!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,201,390!*
That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul.
*Stock Advisor returns as of June 26, 2026.
Daniel Sparks has clients with positions in Tesla. The Motley Fool has positions in and recommends Intel, Nvidia, and Tesla. The Motley Fool recommends ON Semiconductor and Synaptics. The Motley Fool has a disclosure policy.
3 Beaten-Down AI Chip Stocks to Consider Buying in the Sell-Off was originally published by The Motley Fool
-
Nvidia's Market Cap Just Fell Below $5 Trillion. Here's Why It's a Buying Opportunity
Is Nvidia's (NASDAQ: NVDA) incredible run finally over? Since the company released its latest earnings report -- for the first quarter of its fiscal year 2027, ending April 26 -- on May 20, the stock has been trending south. Nvidia's market cap recently dipped below $5 trillion, after peaking at above $5.5 trillion earlier this year. However, despite the market's skepticism, there remain excellent reasons to invest in Nvidia, especially at current levels. Here's why the stock is a no-brainer buy on the dip.
Image source: The Motley Fool. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
The bull case remains intact
Nvidia's bears will point to increased competition in the GPU (Graphics Processing Unit) market, including from companies such as Cerebras Systems (NASDAQ: CBRS), which recently went public. Others will highlight that the hyperscalers -- Nvidia's biggest customers -- are increasingly relying on internally developed custom artificial intelligence (AI) chips, which could decrease their exposure to Nvidia's hardware. Some of them are even exploring selling their AI chips to other data centers, a move that will pit them directly against Nvidia.
These are reasonable concerns. However, several factors make Nvidia's prospects attractive despite these potential obstacles. First, Nvidia still reigns supreme in the GPU space, with a 94% market share, according to some estimates. Whatever the exact number, nobody denies that Nvidia has a runaway lead. Competitors aren't just facing a hardware problem when trying to knock Nvidia off its pedestal. The company's wide moat stems from its sticky CUDA ecosystem, which makes it difficult for customers to switch to competitors. Even seasoned semiconductor leaders like Advanced Micro Devices (NASDAQ: AMD) have made little progress in capturing market share from Nvidia.
Further, the company is launching a new platform, Vera Rubin (Rubin is the GPU, while Vera is a CPU, or Central Processing Unit), that is even better than its previous Blackwell architecture. The Rubin GPU is expected to offer significantly better performance and cost efficiency than Blackwell. That will help Nvidia mitigate the threat from custom AI chips, since one of their appeals is that they offer better price-to-performance for specific workloads than comparable GPUs.
Terms and Privacy Policy
No comments:
Post a Comment