The lion's share of market attention is now mainly concentrated in the technology sector, particularly around stocks related to artificial intelligence and its quick rise to adoption and expansion in the global economy. One stock should come to mind when this environment is described, and that is NVIDIA Co. (NASDAQ: NVDA), a company that briefly became the most valuable company at $3.3 trillion this quarter.

However, Wall Street seems to be shifting away from NVIDIA's hype and into other crucial companies in the semiconductor industry that are heavily invested in pushing the artificial intelligence development agenda throughout the global economy. Investors can see more growth, a cheaper valuation, and more upside by avoiding the masses headed to NVIDIA, even at all-time highs.

These stocks include Allegro Microsystems Inc. (NASDAQ: ALGM) and Synaptics Inc. (NASDAQ: SYNA). Today, investors will focus on two widely followed metrics that the market typically pays attention to when choosing which companies to punish or reward. What better way to start than by gauging where the king of semiconductors, NVIDIA, stands today?

The Tide Shifts: Unexpected Changes for NVIDIA Stock

NVIDIA stock has been the second-best performer in the stock market for the past year, pushing out a stellar 154% performance. This is well deserved, as most of the artificial intelligence spending budget went to this company’s leading semiconductor technology. The caveat to this industry, though, is cyclicality.

The chips industry is more cyclical than most realize, as spending and development are the opposite ends of the cycle. NVIDIA dominated the development cycle before announcing its new chips, which started the spending cycle from its customers, such as Apple Inc. (NASDAQ: AAPL) and others. This new spending sent the stock into a record valuation.

But now the development cycle is back, and Wall Street knows that the party could be about to wrap up for NVIDIA stock. New Street analyst Pierre Ferragu just rated NVIDIA as neutral, down from a buy, quoting that the stock is now a concern at its current valuations, and he’s not wrong.

Valuation multiples are typically justified and backed by earnings per share (EPS) growth rates, which NVIDIA used to have a lot of. Today, NVIDIA analysts expect to see only 25.3% EPS growth for the next 12 months, which, while still high, is not the same as Broadcom Inc. (NASDAQ: AVGO) and its 32.4% projection.

The market is paying 37.3x forward P/E for NVIDIA’s 25.3% EPS growth. Using this growth and multiple as a benchmark, Synaptics and Allegro Microsystems look like a much better deal.

Synaptics Stock: The Favorite Pick for Institutional Investors

Over the past 12 months, up to $442.4 million of institutional capital flowed into Synaptics stock, increasing its institutional ownership rate to 99.4%. This high institutional approval is a vote of confidence for those looking to diversify away from NVIDIA.

Of course, this buying is justified by the same metrics that drew Ferragu away from NVIDIA. Those at Susquehanna see a valuation of $135 a share, daring Synaptics stock to rally by 55.3% from where it trades today, which is only 72% of its 52-week high level.

Backing these price targets is the forecast for up to 70.8% EPS growth for the year, almost three times as much as NVIDIA. Even though this company is set to grow more aggressively than NVIDIA, its valuations are much lower; at a 23.2x forward P/E, Synaptics offers a discount of 37.8% from NVIDIA’s 37.3x valuation.

On a price-to-book (P/B) basis, the discount becomes too big to even put into percentage terms. Today, NVIDIA trades at 61.8x P/B, while Synaptics only trades for 2.8x P/B.

Allegro Microsystems Stock: A Discounted Gem with Irresistible Growth

This stock only trades at 58% of its 52-week high, making it a discount that markets should not miss today. Wall Street forecasts EPS growth of over 160% for the next 12 months, multiples higher than what bulls now expect from NVIDIA stock.

Logically, this stock should command a premium valuation due to its expected growth. However, that's not the case because it is less popular than NVIDIA. Allegro Microsystems trades at a 27.2x forward P/E multiple, which offers a discount of 27.1% from NVIDIA's 37.3x valuation today.

Knowing there is a growth-to-value divergence in this stock, Vanguard Group boosted its stake in Allegro Microsystems stock by as much as 13.5% as of May 2024. This push brought the asset manager's net investment to $226.5 million today.

Like Synaptics, Allegro Microsystems trades at a much lower P/B than NVIDIA, a spread of 4.8x versus 61.8x. Investors now have the homework of figuring out whether the analyst that called the NVIDIA top is correct and whether these two stocks are worthy of a rotation into them if and when capital goes out of NVIDIA.