Semiconductor Sell-Off: 1 AI Chip Stock to Buy, 1 to Hold, and 1 to Sell After Broadcom's Beat

After several years of massive gains, many key semiconductor companies sold off over the course of this past summer. Even though Broadcom's (NASDAQ: AVGO) earnings beat estimates in 2026's second quarter, management's revenue guidance disappointed investors who were already feeling broadly uncertain about the outlook for the chip sector.

Nonetheless, rapid top- and bottom-line growth and high valuations have driven Broadcom higher by almost 600% over the last five years. That has undoubtedly changed its investment thesis, and similar points apply to other chip stocks.

With all that in mind, here's one chipmaker investors should consider buying now, one they should hold, and one I think it's time to sell.

Image source: Getty Images.

The stock to buy: Nvidia

It may surprise investors to see Nvidia (NASDAQ: NVDA) being labeled a buy. Although the company's graphics processing units (GPUs) played a crucial role in making the latest phase of the AI revolution possible, its stock is also up by nearly 1,800% from the cyclical low it hit in October 2022. That could lead investors to assume it has become overvalued.

That is actually not the case, and growth is the reason. Four years ago, before the so-called "ChatGPT moment" in late 2022, Nvidia reported just $6.7 billion in quarterly revenue and had grown by only 3% over the previous year. Fast-forward to its most recent quarter, and revenues had reached $96.2 billion and increased by 106% over the previous year.

Given that level of growth, the stock's gains are understandable. Also, dramatically higher earnings have reduced its P/E ratio to just 28, despite the gains.

Considering the pace of its revenue and earnings growth, the stock appears undervalued today, though new buyers would have to contend with concerns. A forecast that its revenue growth will fall to 65% may sour some investors on the stock, even though that's still rapid growth, objectively speaking. Also, given its $5.3 trillion market cap and $303 billion in trailing-12-month revenues, the law of large numbers is making higher growth in percentage terms a more difficult feat to achieve.

Still, even if a severe AI sector bust were to occur, Nvidia's potential downside seems limited. Forecasts at least indicate that it is not too late to buy Nvidia stock.

The stock to hold: AMD

Nvidia's situation is substantially different from that of Advanced Micro Devices (NASDAQ: AMD). AMD also makes GPUs, and has emerged as one of Nvidia's most prominent competitors in the AI accelerator space. Thanks in part to optimism about its ability to grow that part of its business, AMD stock rose by over 790% since October 2022.

Although Nvidia has long maintained a huge market share lead in that niche of the chip business, AMD's release of the MI450 and Helios rack system could change the competitive dynamics.

AMD also differs from Nvidia in that its data center business provided just 57% of its revenue in the first two quarters of 2026, compared to 92% for Nvidia. AMD continues to earn considerable revenues from its client, gaming, and embedded segments, which may not grow as quickly as the data center segment.

Across that more diversified business, AMD's revenues rose 44% year over year in the first half of 2026 to almost $22 billion -- an impressive result, but one that nonetheless lagged Nvidia's growth rate.

Despite that comparative slowness, AMD's trailing P/E ratio is 132, and its forward P/E stands at 68. That may not be low enough to reassure investors who are concerned about the possibility of a slowdown in the AI infrastructure build-out. The potential for that might appear greater given recent calls for AI developers to slow their efforts down as well.

Lower data center spending could severely affect AMD stock. However, even with fears that AI model developers are losing control of AI, the technology is unlikely to disappear, and AMD should continue to benefit. Knowing that, holding this stock is likely the best course of action right now.

The stock to sell: Qualcomm

A sell call on Qualcomm (NASDAQ: QCOM) may seem surprising at first. The company's remedy for its stagnant chipset business may be the new data center chips it recently unveiled. That hardware has already drawn interest from hyperscalers Meta Platforms and Amazon. Also, trading at a P/E ratio of 21, it looks comparatively cheap.

Unfortunately, it may actually be cheap for a reason. Qualcomm's chipset business has not benefited from AI as much as one would have expected. Even though smartphone makers like Apple are in the midst of an upgrade cycle, Qualcomm's handset revenue shrank by 9% annually in the first nine months of its fiscal 2026 (a period that ended June 26) as macroeconomic conditions weigh on smartphone sales. Moreover, Apple is shifting away from using Qualcomm's smartphone modems -- the iPhone maker is switching to in-house chips. That's expected to cut Qualcomm's sales to Apple by about half sequentially in the December quarter.

To this end, Qualcomm has pivoted more of its focus to the aforementioned data center chips, as well as to the Internet of Things and automotive sectors. Unfortunately, these are areas where it may not have much of a competitive advantage. Its automotive sector increased its revenue by 39% annually in the first three quarters of its fiscal 2026. However, that was not enough to entirely offset sales declines elsewhere in the business, leaving its overall revenues down by 1%.

Admittedly, it is not too late for Qualcomm to mount a comeback, and for that reason, investors should keep watching it. Still, until it regains its footing, investors would likely be best served to do that watching from the sidelines.

Will Healy has positions in Advanced Micro Devices. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Apple, Broadcom, Meta Platforms, Nvidia, and Qualcomm. The Motley Fool has a disclosure policy.