Chip Stocks to Buy After Their Worst Day Since June
I'm LongbridgeAI, I can summarize articles.Chip stocks dropped significantly on Oct. 22, with the PHLX Semiconductor Index falling 6.7%. Despite the sell-off, analysts view this as a buying opportunity for Lam Research, Micron Technology, AMD, and Marvell Technology. These companies reported strong revenue growth and positive outlooks, citing supply chain constraints rather than weak demand as the primary issue. Management forecasts continued growth through 2027, suggesting current valuations offer attractive entry points.
Lam Research (LRCX -0.02%), which sells chipmaking equipment, reported record revenue on Oct. 21. It also said limited clean-room space and shortages of some parts would stop chipmakers and equipment companies from fully meeting demand into 2027.
The PHLX Semiconductor Index dropped 6.7% on Oct. 22, its worst day since June 23. Lam lost 12%, Micron Technology (MU +2.46%) 6%, Advanced Micro Devices (AMD +1.74%) 8%, and Marvell Technology (MRVL +2.25%) 9%.
But Lam was describing more demand than the industry can meet, not less. And all three chipmakers' own outlooks still point up. I think the sell-off makes all three worth buying.
Image source: Getty Images.
Lam's issue is supply, not demand
Lam's revenue rose 22% from the June quarter to $8.22 billion, up 54% year over year. And management still forecast around $8.6 billion in the December quarter.
"[T] his revenue guide would have been a bit higher if not for some near-term supply chain constraints," CFO Doug Bettinger said on the earnings call.
Lam also expects industry spending on chipmaking equipment to pass $200 billion in 2027, up from the mid-$150 billion range this year. Asked what that number would be without the constraints, Bettinger said it "would be higher."
Micron: short on clean rooms, not customers
On Sept. 30, memory maker Micron said industry supply of DRAM and NAND (the two main kinds of memory chips) should stay constrained in 2027 and 2028.
"We expect memory and storage supply-demand conditions to be much tighter in calendar 2027 and 2028 than they were in 2026," CEO Sanjay Mehrotra said in prepared remarks for that day's call.
MU - Micron Technology
NASDAQ · As of 4:00 PM ET 10/23/26
Moneyball Superscore94/100Key data points
Showing what tight supply has done for Micron, its revenue rose 31% sequentially to $54.2 billion in the fiscal fourth quarter of 2026 (which ended Sept. 3), as DRAM prices climbed by a high-teens percentage and NAND prices by about 30%. Management expects another record in the fiscal first quarter of 2027, at roughly $61.5 billion, and to grow in every quarter of fiscal 2027. But the stock is off 29% from its June 25 record close, at about $856 as I write, or about 5 times earnings for fiscal 2027 on analysts' consensus. That price suggests investors expect memory profits to fall soon. Micron is predicting the opposite.
AMD: the upside hinges on supply
AMD is supply-limited, too. In Taipei on Oct. 6, CEO Lisa Su said it plans to substantially increase supply in 2027 and needs more advanced wafer capacity.
On AMD's August earnings call, Su said she saw nothing that gave her pause about meeting its targets. That suggests the limits Lam flagged could matter more for how far AMD beats its plan than for the plan itself. Management guided for around $13 billion in third-quarter revenue, up about 41% year over year, and expects data center sales, led by its artificial intelligence (AI) chips, to more than double next year.
AMD - Advanced Micro Devices
NASDAQ · As of 4:00 PM ET 10/23/26
Moneyball Superscore95/100Key data points
AMD stock, at about $508, is 22% under its Oct. 6 record close. Shares cost around 32 times earnings, based on analysts' consensus for 2027, so the price already counts on that data center doubling.
Marvell: a higher profit target
At its Oct. 6 investor day, Marvell targeted $70 billion to $90 billion of revenue for fiscal 2031 (ending early 2031) and a non-GAAP (adjusted) operating margin of 44% to 46%. Management said the midpoint of those targets implies adjusted earnings of more than $30 a share. Marvell brought in $8.2 billion in fiscal 2026.
Its revenue growth is already picking up, from 28% year over year in the fiscal first quarter of 2027 to 37% in the fiscal second quarter (which ended Aug. 1), and management expects about $3.15 billion in fiscal third-quarter revenue, roughly 52% above the year-ago quarter.
MRVL - Marvell Technology
NASDAQ · As of 4:00 PM ET 10/23/26
Moneyball Superscore88/100Key data points
But at about $223, shares are 22% under their Oct. 6 close. They cost about 31 times earnings, based on analysts' consensus for fiscal 2028, but only about 7 times the earnings Marvell is targeting for fiscal 2031. Of course, that target's over four years off, and Marvell depends on outside manufacturers for its chips -- the sort of chipmakers Lam says can't fully meet demand.
Is the sell-off a buying opportunity?
None of these companies has cut its outlook, and all three stocks just got cheaper.
Micron's the one I'd buy first. Tight supply is already boosting its prices, and the stock's arguably priced for a downturn its own outlook doesn't show.
AMD and Marvell are pricier growth stocks that need their plans to hold up to justify over 30 times expected earnings. I think both are worth considering here, ideally a bit at a time. After all, a slowdown in AI spending might still hit all three stocks hard.