3 Undervalued Chip Stocks to Buy Amid Market Volatility

The semiconductor sector has faced heightened volatility, with stocks tied to the AI boom retreating sharply from mid-2026 peaks amid concerns over the sustainability of AI infrastructure spending, elevated valuations, and the prospect of higher interest rates that could raise the cost of massive data-center buildouts.

Despite these pressures, underlying demand for advanced chips remains robust, leaving select equipment and connectivity specialists trading at discounts that may appeal to longer-term investors.

Against this backdrop, three names that analysts keep singling out are Lam Research (NASDAQ:LRCX), Astera Labs (NASDAQ:ALAB), and Teradyne (NASDAQ:TER), as their roles in the AI supply chain and recent pullbacks align with durable growth drivers.

1. Lam Research

Lam Research is attractive now because its exposure to sustained wafer-fab equipment spending for high-bandwidth memory and logic chips positions it to benefit as AI demand continues, even if near-term multiples have compressed amid broader market caution.

LRCX closed at $222.39 on Tuesday. The shares are down 31.7% over six months but still up 33.6% over 12 months.

Source: Investing.com

Technically, LRCX shares sit below both the 50-day and 200-day moving averages near $280 to $284, with a 14-day RSI around 39 and a negative MACD, confirming a near-term downtrend, yet a recent sharp rebound on elevated volume hints at potential stabilization after the steep decline.

Daily classical pivots place support near $209.33 and resistance near $227.95.

Source: Investing.com

At current levels, the stock trades well below average analyst price target in the $360 range, implying upside of 63%. Bank of America lists the stock among its top picks in the semiconductor sector, and Citi named it a top buy-rated pick right before the sell-off.

2. Astera Labs

Astera Labs merits consideration amid the volatility because its pure-play status in AI interconnects has driven explosive revenue growth exceeding 150% year-over-year in recent quarters, making the current dip a potential entry into a company central to overcoming data-center bottlenecks even as the broader AI trade faces skepticism.

ALAB stock closed at $216.18 last night. It has held up best of the three, down only 4.5% over six months and up 24.8% over 12 months.

Source: Investing.com

On the technical side, the stock trades below its 50-day moving average near $297 and 200-day average near $256, with an RSI in the mid-to-high 30s and a bearish MACD, although a recent double-digit percentage bounce suggests buyers may be stepping in after the recent sell-off.

Pivot support sits near $201.57 and resistance near $226.11.

Source: Investing.com

Analyst consensus targets cluster around $340, pointing to approximately 60% upside. Citi flagged networking names like it as likely to see the largest sales estimate revisions. Bank of America also includes it among its sector favorites.

3. Teradyne

Teradyne appears compelling right now because the increasing complexity of AI processors requires more sophisticated testing, which has driven robust revenue and earnings growth. The recent market-driven pullback has created an attractive risk-reward profile for investors who believe AI-related semiconductor demand will persist beyond short-term volatility.

TER closed at $245.40 yesterday. It has fallen 39.3% over six months, the steepest decline of the three, yet it is still up 33.9% over 12 months.

Source: Investing.com

Technically, TER remains below its 50-day and 200-day moving averages around $350, with an RSI near 34 that is approaching oversold territory and a negative MACD, yet the stock has staged a strong recent rebound of more than 12% in a single session, indicating possible exhaustion of selling pressure.

Pivot support is near $229.82 and resistance near $254.83.

Source: Investing.com

Average analyst targets near $425 imply about 70% upside, with some individual forecasts extending higher and supporting a view that the shares offer meaningful appreciation potential from current levels.

Bottom Line

Collectively, these three stocks have underperformed in the near term due to sector-wide headwinds but retain solid longer-term track records and substantial upside to analyst targets.

Their technical setups remain bearish in the short run, with prices below key moving averages and momentum indicators still soft, yet recent rebounds and proximity to support levels suggest the worst of the selling may be over.

Investors should, of course, weigh these opportunities against individual risk tolerance and the possibility of further volatility if AI funding or competitive pressures intensify.

As always, be sure to check out InvestingPro to stay in sync with the market trend and what it means for your trading. Below are the key ways an InvestingPro subscription can enhance your stock market investing performance:

***

This content is for informational purposes only and not investment advice. Always conduct your own research.

At the time of writing, I am long on the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 via the SPDR Dow ETF (DIA), the SPDR S&P 500 ETF (SPY), and the Invesco QQQ Trust ETF (QQQ). Additionally, I have a long position on the Energy Select Sector SPDR ETF (XLE) and the Health Care Select Sector SPDR ETF (XLV).

I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies’ financials.

The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.

Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.