With the market in correction territory, chip stocks generally have not avoided the carnage. The S&P 500 Index is down approximately 14% from its 52-week high as of the April 22 close, and the Invesco PHLX Semiconductor ETF (NASDAQ: SOXQ) is down around 35% from highs.

Two lesser-known chip stocks—Semtech (NASDAQ: SMTC) and Onsemi (NASDAQ: ON)—have suffered much more, trading at discounts of more than 50% from their 52-week highs. However, these companies have significant opportunities to achieve long-term growth and could be strong buys given their depressed valuations.

Semtech: Long-Term Tailwinds and Historically Low Valuation

Semtech is trading down massively from its 52-week high. The stock hit its high on January 22, but has dropped a whopping 69% from that level. This falling price comes amid a drastic improvement in the company’s overall financial position.

In its most recent quarter, revenue rose 30% year-over-year (YOY), and adjusted operating margin nearly doubled—from just over 9% in fiscal Q4 2024 to nearly 20% in fiscal Q4 2025.

Additionally, the company’s second-largest end market, infrastructure, saw 75% YOY growth. The infrastructure segment includes data center customers.

Morgan Stanley analysts believe the market “might not be fully appreciating Semtech’s potential in the data center market.”

This looks possible, maybe even understated, as Semtech is talking with 20 potential customers for its CopperEdge products. This includes hyperscalers, switch makers, and cable suppliers. As data centers grow larger and process more data, CopperEdge offers an important technological solution.

In the company’s largest end market, Industrial, its LoRa devices saw revenues rise 205% from the prior year quarter. This product is clearly resonating with customers. It has the potential to be a massive long-term growth driver as a key technology used in smart cities of the future.

The stock is trading near its five-year lows when looking at its forward enterprise value to sales (EV/S) ratio. The figure sits at around 2.5x but has averaged 4.6x over the last five years.

The current sentiment around Semtech is mixed, reflecting a balance between recent challenges, the uncertain economic environment, and ongoing optimism.

Morgan Stanley placed a price target of $30 on SMTC stock, indicating upside of 22% over the next 12 months.

However, the long-term opportunity for Semtech looks significantly larger, given its improving financial position and products with long-term tailwinds.

Onsemi: Positioned for EV and Data Center Megatrends

Onsemi is another chip stock that has gotten absolutely battered. It is down nearly 56% from its 52-week high in July 2024.

Onsemi primarily makes chips for auto and industrial markets. These markets have been working through an inventory glut, causing Onsemi to see negative revenue growth for six quarters in a row.

However, Onsemi’s strong profitability has remained despite this downturn. It still boasts an adjusted gross profit margin of around 45% and an adjusted operating margin of more than 25%. This positions the firm as one of the more profitable companies in the technology sector—impressive, given that Onsemi designs and also manufactures its chips.

Lower sales can hit manufacturing companies hard, affecting their economies of scale. The company is targeting revenue growth of 10% to 12% through 2027 as well as a 40% operating margin.

Onsemi sees itself as well-positioned to take advantage of “fast-growing secular megatrends” to drive long-term growth and increased profits. This includes increasing electric vehicle (EV) ownership. It is a leader in silicon carbide (SiC)-based chips that can benefit greatly from this trend.

Onsemi also sees a big opportunity in its SiC Junction Field-Effect Transistors, which can be key in powering data centers. SiC chips offer exceptional power efficiency, making them ideal for use cases that require extensive electricity.

The stock's forward price-to-earnings (P/E) ratio sits at just over 14x, solidly below its five-year average of over 18x.

Overall, it is very difficult to say when the company’s main end markets will return to growth, and more downside could be in store in 2025. However, Onsemi’s profitability, depressed valuation, and technological leadership can allow it to win big when growth resumes.

Analysts remain cautiously optimistic on Onsemi, with a mix of Buy and Hold ratings, and one Sell rating.

The consensus price target of $63.52 implies a nearly 75% potential upside over the next 12 months. However, as the company’s end markets stabilize, investor sentiment could shift quickly.

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