Three Semiconductor Stocks Have Gone on Sale

Three semiconductor stocks have gone on sale after a surprising announcement involving China-based DeepSeek, a free artificial intelligence-powered chatbot that seems similar to ChatGPT but reportedly was developed at a comparatively modest cost.

The news reported on Monday, Jan. 27 caused each of the three semiconductor stocks to essentially go on sale with investors selling them off heavily. However, each of the three semiconductor stocks to consider is a current recommendation of BofA Global Research.

Despite the unexpected new competitor from China, the three stocks can be purchased at a discounted price after Monday’s technology selloff that gives investors a chance enter positions that still have potent profitability potential. The DeepSeek chatbot poses an unexpected challenge but much remains unknown about its true cost, since China’s government often seeks to subsidize technology advances to aid its domestically based companies.

Among $406 billion in data center system spending, semiconductors currently comprise $144 billion, per Gartner. That semiconductor data center spending total is expected to rise to $179 billion by calendar year 2028, based on projected growth of 12.5% compound annual growth rate (CAGR).

Three Semiconductor Stocks Have Gone on Sale: ARM

Arm Holdings plc (NASDAQ: ARM) is a semiconductor and software design company based in Cambridge, England, whose primary business is the design of central processing unit (CPU) cores. The semiconductor stock is among those involved in AI that plunged on Monday, Jan. 27, before gaining back ground on Tuesday, Jan. 28, when it closed at $149.47, up $3.51, or 2.40%.

ARM is rated a buy and has received a $180 price objective from BofA Global Research. The stock’s 76x BofA’s estimated 2026 non-GAAP earnings per share (EPS) is above peers trading at 30x-40x, but is still within 2x-3x price-earnings-to-growth (PEG) framework for peer companies and is justified, in the investment firm’s view, given its superior growth profile.

But downside risks exist that include the historically cyclical nature of semiconductor units, high exposure to a mature smartphone market, competition in the data center and emerging competition from RISC-V in low-end consumer markets. Other risks include  rising geopolitical tensions and deterioration of Arm’s China relationship, ongoing Qualcomm/Nuvia litigation and small trading float.

Chart courtesy of www.StockCharts.com.

Three Semiconductor Stocks Have Gone on Sale: COHR

Coherent Corp. (NYSE: COHR), a Saxonburg, Pennsylvania-based manufacturer of optical materials and semiconductors, is another BofA buy. The stock received a $120 price objective based on 26x 2026 estimated  P/E, above the high end of its historical 5x-25x range. But BofA called it justified due to potential sales upside from hyperscaler upgrades and solid margin expansion opportunities under a new management team.

Outperformance could be attained by better than expected datacom/AI and telco capex trends, cyclical recovery in industrial and auto markets and faster implementation of cost cutting and restructuring measures, BofA wrote in a recent research note. Risks remain too, though.

Those risks include lumpy and cyclical telecom/hyperscaler capital expenditure  trends and sentiment around AI exposure and high volatility. Other key risks feature high debt balance, which could limit operating leverage, and high competition in optical transceivers potentially leading to a price war.

Chart courtesy of www.StockCharts.com.

Three Semiconductor Stocks Have Gone on Sale: CRDO

Credo Technology Group Holding Ltd. (NASDAQ: CRDO), of San Jose, California, delivers high-speed services that break bandwidth barriers on every wired connection in the data infrastructure market, according to company officials. The result is innovative, secure, high-speed connectivity that offers improved power and cost efficiency as data rates and corresponding bandwidth requirements.

Citi Research rates the stock as buy and set a $83 price objective, based on 62x 2026 price-to-earnings (P/E) ratio that is in line with high-growth compute/optical semiconductor peers trading at 20x-73x. Risks to its PO are increased competition from large-cap peers Marvell/ Broadcom, delayed adoption of active electrical cable (AEC) products a downturn in spending across hyperscalers and network operators.

Additional risks include any inability for CRDO to scale and meet demand from products beginning to ramp and supply chain headwinds that may limit available capacity. Another is competition, since 40%-50%-plus compounded annual earnings per share (EPS) growth potential is projected by analysts for Marvell Technology during the next several years within a normal 1x-2x range for high growth semi peers.

Chart courtesy of www.StockCharts.com.

Marvell Technology also is a current recommendation of technology futurist George Gilder in his Gilder’s Technology Report investment newsletter.

However, Marvell Technology is among the semiconductor stocks that took a hit on Jan. 27. Other than DeepSeek, its risks also include integration challenges from recent deals, its pile of net debt and the need to attain expected cost synergies in a timely manner. Other potential pitfalls are cyclical industry challenges such as a possible slowdown in legacy hard disk drive, infrastructure spending and storage assets, as well as competition with larger and better resourced rivals, BofA continued.

George Gilder, head of Gilder’s Technology Report, meets with Paul Dykewicz.

Three Semiconductor Stocks Have Gone on Sale: Summary

Three semiconductor stocks that went on sell due to the recent drop price caused by China-based DeepSeek already are showing signs of recovering. Investors seeking to score strong profits from semiconductors still seem to have that potential.

With technology advances occurring throughout the economy, investing in semiconductor stocks that have gone on sale could be a shrewd strategy. From space missions and satellites above the earth to applications on the ground, semiconductors are a key component for technical advances of numerous types.

Paul Dykewicz is the editor of StockInvestor.com and the editorial director of Eagle Financial Publications in Washington, D.C. He writes and edits for the website, as well as edits investment newsletters, time-sensitive trading alerts and other reports published by Eagle. He also is an accomplished, award-winning journalist who has written for Dow Jones, USA Today and other publications, as well as served as business editor of a daily newspaper in Baltimore. In addition, Paul is the author of the inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain.” He received his MBA in finance from Johns Hopkins University, where he was a two-time president of the school’s Finance Club. In addition, Paul has a bachelor’s degree from the University of Michigan and a master’s degree in journalism from Michigan State University. Outside of work, Paul volunteers with a faith-based organization to assist the poor in Southeast Washington, D.C., to learn personal finance skills to lift themselves out of debt.