2 Top Semiconductor Stocks to Buy Before Artificial Intelligence (AI) Sends Them Soaring

Semiconductor stocks have taken a hammering in the past month, which is evident from the 11% decline in the PHLX Semiconductor Sector index. A big reason behind the index's drop is the ongoing trade war triggered by the tariffs imposed by the Trump administration on Canada, Mexico, and China, along with the reciprocal tariffs that the U.S. plans to impose on April 2.

The trade war has dampened economic sentiment in the U.S., and there are fears that the tariffs could lead to increased costs for major technology companies such as Apple and Nvidia. Semiconductor stocks have been caught in the midst of the trade war as the risk-off sentiment on Wall Street means that wary investors have started booking profits during these times of uncertainty.

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What's worth noting is that investors have been overlooking the solid results delivered by companies in the semiconductor sector of late, driven by a major catalyst in the form of artificial intelligence (AI). However, the recent pullback in semiconductor stocks means that investors can now get their hands on some top names in this sector at relatively attractive valuations.

Here's a closer look at two semiconductor stocks that seem worth buying after pulling back significantly of late.

1. Marvell Technology

Marvell Technology (NASDAQ: MRVL) stock has dropped a whopping 35% in the past month. This significant drop has made the chipmaker an extremely attractive stock to buy right now as it is trading at just 22 times trailing earnings. One glance at Marvell's latest quarterly results and guidance will tell you why buying this chip stock right now could turn out to be a smart move.

Marvell finished fiscal 2025 with a 5% increase in revenue to $5.77 billion. The company's earnings also increased in the low single digits to $1.57 per share. However, Marvell's guidance for the first quarter of fiscal 2025 points toward a remarkable acceleration in its top- and bottom-line growth. The company expects to earn $0.61 per share in the current quarter on revenue of $1.87 billion.

Those numbers would be a massive improvement over the year-ago period's earnings of $0.24 per share and revenue of $1.16 billion. Simply put, Marvell's earnings are on track to jump by 2.5x in the current quarter, while its top-line growth will be around 61%. So, buying Marvell looks like a no-brainer right now considering its cheap valuation.

More importantly, Marvell seems capable of sustaining its stunning growth thanks to the healthy demand for its custom AI processors and networking chips. The company currently has two customers for its custom AI chips. These customers are purchasing its custom AI chips in large volumes, and they are also working with Marvell to develop next-generation processors.

What's more, Marvell is engaged with a third cloud hyperscale customer for custom AI processors, pointing out that it will start production for this new customer next year. The chipmaker pulled in more than $1.5 billion in revenue from selling AI chips last year, and it believes that it is well on course to substantially exceed its fiscal 2026 AI revenue target of $2.5 billion.

The start of shipments to a third customer along with the adoption of Marvell's next-generation custom AI processors is likely to push the company's AI revenue to even stronger levels in the coming years. Even better, Marvell is looking to push the envelope in the custom AI chip market with its new 2-nanometer (nm) chips, which would be an upgrade over its current offerings that are based on 3nm and 5nm process nodes.

A smaller process node will enable Marvell to deliver more computing power while reducing electricity consumption, and this could help the company corner a bigger share of the fast-growing custom AI silicon opportunity. Marvell points out that the size of the custom AI chip market could increase at an annual rate of 45% through 2028, which means that it is at the beginning of a terrific growth curve.

All this makes Marvell a top semiconductor stock to buy following the sharp pullback in the last month, as the company's robust top- and bottom-line growth along with its cheap valuation could lead to a solid turnaround and send its shares higher in the future.

2. Arm Holdings

Arm Holdings (NASDAQ: ARM) stock has lost 26% of its value in the past month, and it is trading at a relatively cheaper valuation right now compared to where it was at the end of 2024. Arm currently has a forward earnings multiple of 58. Though that's expensive when compared to the Nasdaq-100 index's forward earnings multiple of 25, it is a tad cheaper than Arm's forward earnings multiple of 62 at the end of 2024.

Investors who aren't comfortable with this expensive valuation right now would do well to keep a watch on Arm stock and consider buying when it becomes even more attractive. However, those with a higher appetite for risk looking to add a top AI stock to their portfolios may start accumulating Arm considering the important role that it is playing in the global AI chip market.

The British company is known for licensing its chip architecture to chipmakers and consumer electronics companies, using which they can design central processing units (CPUs), graphics processing units (GPUs), and other kinds of solutions that can be deployed in automotive, consumer, and computing end markets. Arm charges a licensing fee from customers using its intellectual property (IP) and also gets a royalty from each chip that's designed using its technology.

Arm is now witnessing strong growth in demand for its AI-focused chip architecture, which is being used by smartphone makers and cloud companies to develop AI chips. For example, Nvidia's Grace server CPU is based on Arm's IP, and the company is also a technology partner in the $500 billion Stargate project that aims to construct AI data center infrastructure in the U.S. over the next four years.

On the other hand, Arm holds a monopoly-like position in the smartphone application processor market with a share of over 99%. Arm's solid hold in the smartphone processor market and its growing influence in the data center space are leading to solid royalty growth. The company reported a 23% year-over-year increase in royalty revenue in the third quarter of fiscal 2025 to $580 million.

The fact that it is getting higher royalties for its AI-focused Armv9 explains why the company's earnings increased 26% year over year in the previous quarter as compared to the 19% jump in revenue. Looking ahead, Arm seems well-placed to deliver an acceleration in its earnings growth thanks to the proliferation of AI in end markets such as data centers and smartphones. This is probably the reason why analysts are expecting its bottom-line growth to step on the gas.

ARM EPS Estimates for Current Fiscal Year data by YCharts

All this indicates that Arm could indeed turn out to be a top investment in the long run, and its recent pullback may have just opened up a window for investors looking to add an AI semiconductor stock to their portfolios.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Nvidia. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.