There are some alternative chip stocks available beyond the marquee names of Nvidia (NASDAQ:NVDA), Intel (NADAQ:INTC) and the like. The reason I’m bullish on these companies is because they have one thing in common: lower valuations than the mainstream stocks we’re all used to talking about.
The stretched valuations of the big semiconductor players is a key risk to investing in them. Many have ridden the wave of strong demand and investor enthusiasm for sectors like artificial intelligence and autonomous vehicles. However, their lofty valuations leave little room for error or any hiccups in execution.
The alternative chip stocks I’m looking at fly under the radar but offer promising technologies and capabilities. Because they are lesser-known, their stock prices haven’t been bid up to the same dizzying heights. This provides an attractive entry point for investors seeking exposure to the semiconductor sector without paying premium valuations.
So with that being said, here are three alternative chip stocks for investors to consider for March this year.
ASML (ASML)
ASML (NASDAQ:ASML) is a leading manufacturer of photolithography systems, essential for semiconductor foundries.
Despite its market cap of $343 billion, I think its one of those alternative chip stocks for investors to consider, as it’s not nearly as much on investors’ radars as some of the marquee names discussed in the financial media.
I think that the best is yet to come for this stock. ASML reported net sales of 27.6 billion euros (approximately $30 billion) for 2023, a solid 30% growth from the previous year. The company’s net profit increased by 9% to 2.0 billion euro in Q4 2023, surpassing analyst expectations.
Also, the company registered orders worth more than 9 billion euros in Q4 2023, indicating strong demand, especially for its advanced “extreme ultraviolet” (EUV) machines For 2025, ASML has high expectations, forecasting significant growth. Analysts have speculated on potential sales growth, with estimates suggesting a range of 30 billion euros to 40 billion euros.
GlobalFoundries (GFS)
GlobalFoundries (NASDAQ:GFS) focuses on radio-frequency communications chips for 5G and IoT devices, as well as automotive manufacturers. With a market cap of around $28 billion at the time of writing, it’s one of the smaller alternative chip stocks on this list, and I believe that it deserves investor attention.
I also believe that now is a good time to load up on shares for GFS for the following reasons. For 2023, GFS faced a revenue decline of 9% year-over-year, partly due to reduced demand in certain technology markets. However, this decline was mitigated by a strong performance in the automotive sector, where revenue tripled from the previous year. The company’s full-year gross margin improved by 70 basis points over 2022.
It expects inventory reductions to continue in the first half of the year, with an improvement in demand on the horizon. The company projets shipping 3 million wafers in 2024, and is also buoyed by IoT tailwinds as the market expands.
Skyworks Solutions (SWKS)
Skyworks Solutions (NASDAQ:SWKS) produces semiconductors for wireless handsets and other devices, with a significant portion of its revenue coming from Apple (NASDAQ:AAPL).
I feel that SWKS could find a home in an investor’s portfolio if they are bullish on the chip market specifically for mobile handsets, and this creates its differentiator to the larger brands on the market.
The company reported revenue of $1.202 billion in Q1 2024, with mobile revenue comprising approximately 71% of the total. This marks an increase from the previous period. The company anticipates revenue between $1.02 billion and $1.07 billion for Q2 of fiscal 2024.
I also believe that SWKS is cheap on the valuation front in addition to its market cap of around $16 billion. Its forward price-to-earnings ratio is just 14 times earnings, while it trades at just three times forward sales. This means it’s significantly cheaper than the median of its peers, and is therefore one of those alternative chip stocks to consider.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
