Semiconductor Sell-Off: 5 Stocks to Buy on the Dip

Semiconductor stocks have come under pressure as investors question the durability of the AI infrastructure build-out, driven by financing concerns alongside uncertain AI utility and revenue projections. Gartner recently projected that AI revenue would not be able to support the current build-out and that the neocloud market would collapse by 2030.

However, cloud computing companies are seeing insatiable demand for AI infrastructure and seeing strong returns on their chip and networking investments. Even historically conservative companies like ASML Holding and Taiwan Semiconductor Manufacturing (NYSE: TSM) have aggressively expanded their capacity to keep pace with surging demand for their machines and services. This would point to the current AI boom having a long, continued runway.

With the stocks under pressure, let's look at five semiconductor stocks to buy on the dip.

Nvidia

Nvidia (NASDAQ: NVDA) is the primary company fueling the AI boom with its graphics processing units (GPUs). These are the main chips used to run AI workloads, and as a result, Nvidia continues to see surging growth. Meanwhile, the company has created a wide moat in the chip market for AI training, as most original AI code was written on its CUDA software platform and optimized for its GPUs.

The stock trades at a forward price-to-earnings (P/E) of just above 13.5 based on estimates for fiscal 2028 (ending January 2028), That makes it a steal at these levels if the AI infrastructure boom continues.

Broadcom

While Nvidia dominates the merchant AI accelerator market, Broadcom (NASDAQ: AVGO) is the go-to company in the custom AI chip market. Hyperscalers have been increasingly designing their own custom chips to lower costs, and one of the main companies they turn to for help in developing these AI ASICs (application-specific integrated circuits) is Broadcom. Among its customers are Alphabet, Anthropic, OpenAI, and Meta Platforms. With surging demand, Broadcom sees its custom chip revenue quadrupling to $230 billion over the next two years. With the stock trading at a forward P/E of 11 times fiscal 2028 estimates, the stock is a buy.

Advanced Micro Devices

Advanced Micro Devices (NASDAQ: AMD) is riding two powerful waves in inference and agentic AI. Its chiplet GPUs, which can be packaged with more memory, are great for inference, and the company has gotten large GPU commitments from OpenAI, Meta Platforms, and Anthropic for its GPUs. At the same time, AMD is seeing demand surge for its central processing units (CPUs), given the rise of agentic AI. Given its enormous growth opportunities ahead, the stock looks like a buy on the recent dip.

Image source: Getty Images.

Cerebras Systems

Arguably the highest risk-reward name on the list is Cerebras Systems (NASDAQ: CBRS). Its wafer-sized SRAM-based chips provide lightning-fast speeds for inference. The company claims its systems provide 30 times the inference speeds versus GPUs and are six times faster than Nvidia's Groq-based language processing units (LPUs). However, they are also pricey and are only sold as part of a complete system due to their power consumption management and cooling requirements.

The company has signed a large deal with OpenAI and has formed a partnership with AMD on a disaggregated solution where its system handles the important decode phase of inference. If the company's systems can break into the mainstream, the stock could have huge upside. The recent dip, meanwhile, has sent the stock below its recent IPO price.

Taiwan Semiconductor Manufacturing

As the largest foundry in the world, Taiwan Semiconductor Manufacturing is responsible for manufacturing the vast majority of advanced logic chips, including GPUs, custom AI ASICs, and CPUs. As such, it is riding the same trends that every other company on this list is benefiting from right now. At the same time, as the only chip manufacturer that has consistently shown it can make these advanced chips at high yields (low defect rates) at scale, it has become a vital cog in the semiconductor value chain while commanding strong pricing power.

At a forward P/E of 18 based on 2027 analyst estimates, the stock is attractively valued and a buy on this semiconductor sector pullback.

Geoffrey Seiler has positions in Advanced Micro Devices, Alphabet, and Broadcom. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Alphabet, Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.