3 Must-Watch Semiconductor Stocks as NVIDIA Takes a Breather

Key Points

• While NVIDIA stock's price action has cooled off for the past quarter, other stocks in the semiconductor industry and its lateral plays could shine.
• Advanced Micro Devices shows all the signs of a potential catch-up to NVIDIA if not outperformance.
• Kulicke and Axcelis offer both upside and momentum as the industry adjusts its valuations this year.

The past two years have favored one sector of the stock market overall: the technology sector, with a specific amount of attention going into the semiconductor industry. Just as in any popularity cycle in the market, there was one darling name that investors chose to keep their sights on: NVIDIA Co. NASDAQ: NVDA. However, the cycle has run its course, and now that stock is cooling off as judged by the recent price action.

Over the past three months, an entire quarter, NVIDIA stock has been hovering between a negative 4% and positive 8% performance, which can be assumed to be flat at best. All this while other names in the quantum computing space have taken over in terms of attention and performance, such as Rigetti Computing Inc. NASDAQ: RGTI, giving semiconductors time to adjust any mispricing opportunities.

This is why stocks falling behind the NVIDIA wave might see their time of day in the coming months, as these adjustments bring a sense of reality back to the market. Fitting these criteria, investors can find potential buy opportunities in names like Advanced Micro Devices Inc. NASDAQ: AMD at today’s discounts or even some companies acting as a pivotal support function to chipmaking, such as Axcelis Technologies Inc. NASDAQ: ACLS and Kulicke and Soffa Industries Inc. NASDAQ: KLIC.

AMD: Closing the Gap on NVIDIA Stock

When investors in Advanced Micro Devices stock against NVIDIA, a few things will become clear right away regarding this underlying opportunity. First, it is the price action itself, as NVIDIA stock now trades at 90% of its 52-week high, while Advanced Micro Devices has fallen to a low of 53% of its 52-week high.

Typically, when these significant gaps in price action occur, the market must have a strong reasoning behind the widening spreads. Today, there seems to be none. In fact, investors could argue that Advanced Micro Devices should start catching up to NVIDIA’s cooling price action.

The reason is the earnings per share (EPS) growth forecasts coming from Wall Street analysts. For NVIDIA, analysts forecast up to $6.22 in EPS for 2026, brining a 27.5% expected growth rate for the next 12 months. On the other hand, Advanced Micro Devices is forecasted to deliver up to $4.16 in EPS in 2026, which is a much more attractive growth rate of up to 41.5%.

Since EPS and EPS growth typically drive stock prices and valuations, it would make sense to see Advanced Micro Devices catch up to NVIDIA. This is especially true as the market is already willing to pay a forward price-to-earnings (P/E) ratio of 33.1x for Advanced Micro Devices compared to the 19.5x multiple in NVIDIA stock.

Some would call this expensive; others will understand that the market will always be willing to pay a premium for the stocks it believes will outperform in the near future, reiterating the thesis behind a potential long in Advanced Micro Devices.

Go Lateral With Axcelis and Kulicke

Another heavily discarded area of the semiconductor popularity run is the lateral industries that support chipmaking, such as manufacturers and machinery providers. This is where both Axcelis and Kulicke come into play for investors to consider another potential run for NVIDIA’s money.

Investors can choose from two different setups here. Axcelis stock trades at the lowest level on a price action basis, at only 46% of its 52-week high, giving investors a better risk-to-reward ratio to consider, as limited downside pales compared to potential upside.

Wall Street analysts have landed on a consensus price target of up to $155.8 a share for this company, calling for up to 115.5% upside from where it trades today. This is a great deal for investors to consider. On the other hand, Kulicke and Soffa's stock offer a good setup for those who prefer momentum.

Trading at 83% of its 52-week high, KLIC stock has a few more bull runs up its sleeve, considering that Wall Street analysts now forecast up to $2.82 in EPS for 2026, a growth rate of 59.3%. This might explain the recent institutional buying activity in the stock.

Artemis Investment Management decided to boost its holdings in Kulicke stock by as much as 20.6% as of January 2025, bringing its net position to a high of $9.9 million today. This move also serves as a gauge for investors to measure how bullish participants might become on this stock moving forward.