Chip Stocks to Buy After Their Worst Day Since June
Is a warning of too little supply actually a reason to sell chip stocks?
Chip manufacturing equipment maker Lam Research reported record revenue on October 21 and warned that limited clean-room space and parts shortages would prevent chipmakers and equipment companies from meeting demand through 2027. The semiconductor index fell 6.7% on October 22, its worst day since June 23, with Lam losing 12%, Micron Technology 6%, Advanced Micro Devices 8%, and Marvell Technology 9%.
Despite the sell-off, all three chipmakers still have positive outlooks. Lam's revenue rose 22% from the June quarter to $8.22 billion, up 54% year over year, and management expects around $8.6 billion in the December quarter. Micron expects memory and storage supply-demand conditions to be tighter in 2027 and 2028 than they were in 2026, with revenue rising to $61.5 billion in the fiscal first quarter of 2027 and growing in every quarter of fiscal 2027.
AMD, also supply-limited, plans to increase supply in 2027 and needs more advanced wafer capacity. Its third-quarter revenue guidance was $13 billion, up 41% year over year, and data center sales, led by its AI chips, are expected to more than double next year. Marvell targets $70 billion to $90 billion of revenue for fiscal 2031 with a non-GAAP operating margin of 44% to 46%, bringing in $8.2 billion in fiscal 2026 and expects a 37% revenue growth in the fiscal second quarter of 2027.
However, all three stocks are underpriced based on their optimistic outlooks and the expected growth in the sector.
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