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

Semiconductor stocks have been experiencing a sell-off as investors grow concerned about the long-term viability of AI infrastructure development. Gartner recently forecasted that AI revenue would not suffice to sustain the current build-out, and the neocloud market could collapse by 2030. However, cloud computing firms are witnessing strong demand for AI infrastructure, resulting in significant returns on their chip and networking investments.

Even traditional, cautious companies like ASML Holding and Taiwan Semiconductor Manufacturing (TSM) have rapidly expanded their capacity to match the surging demand for their machines and services. This suggests the current AI boom is likely to persist for an extended period. Given the market pressure, here is a look at five semiconductor stocks to purchase on the dip.

Nvidia (NVDA) is the primary driver of the AI boom, with its graphics processing units (GPUs) serving as the backbone for running AI workloads. As a result, Nvidia continues to experience rapid growth. The stock trades at a forward price-to-earnings (P/E) ratio of just above 13.5 based on estimates for fiscal 2028, making it an attractive buy if the AI infrastructure boom continues.

Broadcom (AVGO) specializes in custom AI chips, catering to hyperscalers that design their own AI ASICs (application-specific integrated circuits) to cut costs. Notable customers include Alphabet, Anthropic, OpenAI, and Meta Platforms. Due to surging demand, Broadcom anticipates its custom chip revenue to quadruple to $230 billion over the next two years. Trading at a forward P/E of 11 times fiscal 2028 estimates, Broadcom emerges as a compelling buy.

Advanced Micro Devices (AMD) is benefiting from two key trends: inference and agentic AI. The company's chiplet GPUs, which can be combined with additional memory, are well-suited for inference tasks. Moreover, AMD has secured substantial GPU commitments from OpenAI, Meta Platforms, and Anthropic. Meanwhile, demand for AMD's CPUs has surged due to the rising popularity of agentic AI. Given its substantial growth prospects, AMD appears to be a buy on the current dip.

Cerebras Systems (CBRS) presents the highest risk-reward potential among the list. Its wafer-sized SRAM-based chips offer lightning-fast inference speeds, with the company claiming its systems deliver 30 times the inference speed compared to GPUs and six times faster than Nvidia's Groq-based language processing units (LPUs). However, the chips are expensive and are sold as part of complete systems due to their power management and cooling requirements.

Cerebras has secured a significant deal with OpenAI and has partnered with AMD on a disaggregated solution to handle the decoding phase of inference. If the company can establish a presence in the mainstream market, CBRS's stock could experience significant upside. Currently trading below its recent IPO price, the stock's recent dip could present an opportunity for investors.