The 3 Most Undervalued Semiconductor Stocks to Buy in January

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The semiconductor space has been one of the hottest areas of the tech scene over the past year, thanks to the intense heat generated by artificial intelligence (AI) technologies. Powering the impressive large language models (LLMs) are special chips that have been working overtime of late.

As demand for AI (generative, predictive, etc.) rises, so will demand for cutting-edge hardware that can keep up with the latest, greatest, and most computationally intensive models. As valuations creep higher, the main question is whether scorching-hot demand levels can continue in 2024 or if the whole scene is due for a violent correction.

I think it’s unwise to bet against the semiconductor stocks as AI sprints into the new year with no signs of breathing heavily.

Broadcom (AVGO)

broadcom (AVGO) logo outside office building

Source: Sasima / Shutterstock.com

Broadcom (NASDAQ:AVGO) is a semiconductor firm that also has a bustling software business built up over the years via M&A. As a perfect mix of hardware and software, Broadcom stands out as a terrific way to play the semiconductor scene without the high stakes of being at the front of the lines, like some of the AI chip heavyweights, including AMD (NASDAQ:AMD). Over the past year, Broadcom stock has essentially gone parabolic, blasting off more than 97% since this time last year.

Despite nearly doubling in a year, the dividend yield remains relatively attractive at 1.85%. It’s not nearly as swollen as it was over a year ago when the yield was in the ballpark of 4%, but you’re still getting a nice (and very competitive) mix of growth and income from the name at today’s prices.

As AI continues heating up, Broadcom stock seems like a great way to play the boom as it gains more skin in the AI chip scene. Broadcom CEO Hock Tan is a raging bull on AI chips, at least according to Bernstein analyst Stacy Rasgon, who thinks AVGO could make a run for $1,250.00 per share (his current target). I’m in agreement. There’s a lot at stake as Broadcom marches into 2024 with its own AI edge.


In this photo illustration, the AMD logo is shown on a smartphone screen.

Source: Pamela Marciano / Shutterstock.com

AMD is going into 2024 with a lot to prove to the world as it looks to do its best to close the gap with the AI chip leaders. As AI demand stays hot, so too will shares of AMD as the firm looks to unveil new AI offerings. The MI300X (AMD’s impressive AI offering) experienced an “inflection in demand” last year, according to KeyBanc analyst John Vinh.

Going into 2024, there’s no reason to see demand backtracking by a similar magnitude, either. More companies focus on doubling down on their AI efforts and tailoring their own AI chatbots to face the general public. Beyond the MI300X AI chip, AMD’s Ryzen 7 8700G stands out as a powerhouse, fully equipped with its own neural processing unit, ready to tackle the latest and greatest AI applications.

Undoubtedly, AMD seems to be firing on all cylinders when it comes to AI-ready chips, and it’s not about to slow down for anybody. All considered, AMD stands out as a fine semiconductor stock for those seeking to bet on an underdog that has a somewhat decent shot of becoming a leader within the next decade.

Apple (AAPL)

Apple logo on a pink and purple background. AAPL stock.

Source: Moab Republic / Shutterstock

Apple isn’t a semiconductor pure-play, but it has skin in the AI chip game with Apple Silicon. In 2024, I expect the newest iterations of Apple Silicon to be even more AI-capable than what’s in the latest and greatest Apple products today. Indeed, it’s not what’s on the outside of the iPhone that counts most; it’s what’s on the inside.

As it stands today, the iPhone 15 Pro models have a powerful chip that is capable of running a wide range of tasks. That said, this year, I’d look for the latest silicon to offer more than just good graphics on mobile games. Given recent rumors, it’s hard not to feel optimistic that something big could be on the horizon regarding AI. Morgan Stanley (NYSE:MS) seems to think 2024 is Apple’s year to grab the AI bull by the horns.

I believe very few people are paying attention to the bull case when it comes to Apple stock these days. It’s one of the most despised of the Magnificent Seven right now, and for backward-looking reasons that I believe are overblown beyond proportion. Perhaps silicon is the driver that helps reinvigorate AAPL stock amid its ugly year-to-date funk.

On the date of publication, Joey Frenette held shares of Apple. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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