Morningstar Inc. urges investors to shift attention away from the much-hyped field of artificial intelligence chips. Instead, the equity research firm focused on four legacy semiconductor makers it believes are undervalued, two of which could see gains of more than 70%. Morningstar’s report comes amid a surge in demand for artificial intelligence accelerators, especially Nvidia’s graphics processing units (GPUs). However, the company’s latest research note suggests investors may find better opportunities outside of the AI chip boom. “Digital chipmakers appear overvalued as we do not like AI-related digital stocks,” Morningstar equity strategists led by Brian Colello said in a note to clients. (e.g. NVIDIA, etc.) “However, the median analog/mixed-signal chip names are undervalued by 17% and represent the majority of our preferred chips in this space. Morningstar’s top picks include Infineon Technologies AG and STMicroelectronics: Germany’s largest semiconductor maker Infineon Technologies AG will benefit from increased vehicle electrification and the rise of electric vehicles, according to Morningstar. “Infineon Technologies AG Ling is a global leader in power semiconductors, and given the electrification of vehicles and the rise of electric vehicles, the company should be well-positioned to aid in the development of automotive powertrains over the next decade, including the adoption of silicon carbide-based materials semi-finals, ” said the company’s strategist. Morningstar expects Infineon shares to rise 70% over the next 12 months, to 50 euros ($54.90) per share. The stock also trades in the United States. STMicroelectronics, another Morningstar pick, has strong partnerships in the automotive space, including with electric vehicle giant Tesla. Morningstar believes that concerns about an oversupply of silicon carbide semiconductors and potential competition from Chinese manufacturers may be exaggerated, suggesting that STMicroelectronics stock has been “unduly punished.” “We like STMicroelectronics’ exposure to the long-term upside of rising chip content per vehicle,” Morningstar said. The company expects the U.S.-listed stock to rise to $52 per share over the next 12 months, up 85% %.
