Chip stocks rallied strongly in 2025 on AI and memory tailwinds. The Philadelphia Semiconductor index ($SOX) jumped more than 40% as investors bet on accelerating data-center spending. Mizuho notes that AI infrastructure buildouts, wafer-fab equipment cycles and memory upgrades should keep the momentum going.
Within this bullish market, Microchip Technologies (MCHP) stands out. MCHP stock has climbed more than 32% over the past year. The optimisim around MCHP received another boost after Mizuho named Microchip as one of its key semiconductor outperformers for 2026, citing exposure to wafer fabrication and AI-driven demand.
With valuations still considered reasonable across parts of the U.S. chip sector, investors are now weighing whether MCHP stock can keep its upward momentum going.
About MCHP Stock
Microchip is a broad-line semiconductor firm specializing in embedded controllers, microcontroller units (MCUs), and analog and mixed-signal chips. Its “Total System Solutions” approach, combining wide-ranging hardware and software offerings, targets high-growth markets such as automotive, IoT and data centers.
Microchip has pursued product launches that target the AI cycle. In late 2025, it unveiled the industry’s first 3nm PCIe Gen6 switch chip for high-speed AI connectivity, underscoring leadership in advanced silicon. Moreover, the company has announced custom firmware for Nvidia's (NVDA) DGX Spark AI supercomputers, tailoring its MEC1723 embedded controller for secure boot and power management in Nvidia's AI servers. These developments emphasize Microchip’s role in next-gen AI infrastructure, aligning its roadmap with secular trends.
Through 2025, the stock has outperformed many peers. MCHP stock trades at about $74 currently, sitting near its 52-week high of $77.20. Also, its 50-day moving average is below the current price, indicating continued positive momentum.
However, this rally comes with rich valuation. Microchip’s adjusted price-to-earnings (P/E) ratio sits in the triple digits at roughly 125 times, meaningfully above the sector median for semiconductor peers. In other words, the market is bidding up MCHP stock relative to many chipmakers, implying lofty expectations for revenue and earnings growth.
Microchip's Solid Q2 Earnings
Microchip recently gave a double-beat quarter, impressing Wall Street. The company posted net sales of $1.14 billion, topping forecasts. Revenue was still down about 2% from a year ago as customers continue to work through excess inventory, but sales climbed 6% sequentially. That's a sign that conditions may be stabilizing.
On a GAAP basis, earnings were modest at $0.03 per share, but the non-GAAP picture was much healthier. Microchip earned $0.35 per share, compared with about $0.46 a year ago. Margins held up well, with gross margin coming in near 56.7%, and expenses were kept under control. EBITDA margins stayed above 20%, and the company generated $51.6 million in free cash flow even after capital spending.
Looking ahead, management’s fiscal Q3 2026 outlook points to continued margin improvement. Executives also reiterated their long-term target of a 40% operating margin, underscoring the company’s operating leverage as demand recovers.
What Do Analysts Say About Microchip Stock?
Wall Street is divided on MCHP stock’s near-term outlook. Some firms remain bullish. For example, Goldman Sachs rates Microchip a "Buy" with an $88 target, reflecting faith in its AI segment and valuation. Likewise, Needham and Stifel maintain “Buy” ratings, recently lifting targets to about $77 and $80, respectively. In contrast, more cautious firms like Morgan Stanley and Wells Fargo have "Hold" ratings with targets in the high $60s or lower, citing uncertain recovery timing. Finally, Mizuho itself carries an "Outperform" rating with an $83 target.
Overall, the consensus from 24 analysts with coverage is a “Moderate Buy” rating. However, the current price is almost at the mean target of $77.43. Meanwhile, the Street-high target is $88, which gives just 19% potential upside, so the stock is already priced for perfection. Accordingly, while Microchip’s long-term prospects do look promising, the stock’s premium valuation leaves investors little margin for error in the near term.
On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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