Semiconductor Sell-Off: The Best Chip Stocks to Buy Right Now Before They Skyrocket Once Again

Semiconductor stocks witnessed a brutal sell-off on Friday, Oct. 30, after Intel's guidance came in well below expectations due to a declining personal computer (PC) market.

The PHLX Semiconductor Sector index fell 7% in a single session. Shares of Nvidia (NASDAQ:NVDA) were down more than 4% on Oct. 30, while other popular semiconductor stocks, such as Broadcom (NASDAQ:AVGO) and Micron Technology (NASDAQ:MU), also pulled back substantially.

However, I think that the sell-off in this sector is overdone. That's because chips play a central role in various applications, including artificial intelligence (AI), smartphones, computers, vehicles, and factories. Bank of America estimates that the U.S. semiconductor industry's revenue alone could reach $3.2 trillion in 2030, up from an estimated $1.7 trillion this year.

As such, now is a good time to buy some top names in this sector following the recent pullback.

Image source: Getty Images.

The AI boom will ensure solid growth for these semiconductor companies

Nvidia and Broadcom are among the top two semiconductor companies capitalizing on the AI-fueled chip demand. Both companies have been enjoying solid growth lately, and the good news is that they expect to sustain their momentum going forward.

NVDA Revenue (TTM) data by YCharts

Nvidia management, for instance, noted on the August earnings call that it expects revenue to increase by 70% in fiscal 2028. Nvidia CFO Colette Kress noted that "this is a supply-constrained outlook," suggesting that the company could clock faster growth if it can fulfill more demand. Nvidia's guidance is quite impressive, given that its top line is expected to jump 90% in fiscal 2027 (ending in January next year) to nearly $412 billion.

Even better, the company's earnings per share (EPS) are anticipated to jump by 95% in fiscal 2027, followed by a 71% increase in fiscal 2028. Meanwhile, Broadcom expects its AI revenue to double over the next couple of fiscal years. The incredible demand for Broadcom's custom AI processors and networking chips will push its AI semiconductor revenue to $58 billion in the recently concluded fiscal 2026, up by 186% from the prior year.

The company forecasts $230 billion in AI semiconductor revenue in fiscal 2028, nearly 4x the AI revenue it is poised to generate this year. So, it is easy to see why analysts are anticipating both Nvidia and Broadcom to clock healthy EPS growth over the long run.

AVGO EPS LT Growth Estimates data by YCharts

Moreover, both stocks are attractively valued following their recent slides, especially when their growth potential is considered. Nvidia has a price/earnings-to-growth (PEG) ratio of just 0.27, while Broadcom's PEG ratio is 0.99, according to Morningstar. The PEG ratio is a forward-looking valuation metric that accounts for a company's projected annual earnings growth over the next five years.

A reading below 1 suggests the stock is undervalued relative to its growth potential. So, investors are getting a good deal on these AI stocks that could make them richer in the future. Nvidia's 12-month median price target of $320 implies a 58% jump, while Broadcom's target of $530 suggests 64% gains. As such, buying these top chip stocks right now could prove profitable.

The memory market is set to get bigger, making Micron a no-brainer buy

Micron Technology has been seeing exponential growth in revenue and earnings due to the terrific demand for memory chips and the accompanying supply shortage.

MU Revenue (TTM) data by YCharts

The good news is that the favorable memory market dynamics fueling Micron's growth are sustainable. Micron's peer SK Hynix recently noted that the memory shortage won't be going away until 2030, driven by robust demand from AI data centers and emerging AI applications such as humanoids. As a result, SK Hynix estimates that memory demand will continue to outpace supply until the end of the decade.

This is great news for Micron stock investors, especially given that it trades at an attractive 12 times earnings. Micron's 24% share of the dynamic random-access memory (DRAM) market and 15% share of NAND flash storage memory put it in a terrific position to sustain the healthy growth it has been clocking over the past couple of years.

Not surprisingly, Micron has a 12-month median price target of $1,575, implying 89% upside from current levels. The stock could easily outpace analysts' targets over the coming year as it trades at an extremely attractive valuation even though it is expected to deliver long-term EPS growth of 55%, according to YCharts.

As such, savvy investors can consider using Micron's latest pullback to buy a top growth stock trading at an attractive valuation, as it could make them richer over the long term amid the secular growth of the memory market.

Bank of America is an advertising partner of Motley Fool Money. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom, Intel, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.