A Wall Street Analyst Says the Next Big Chip Winners Are the Ones No One Is Talking About Yet. Here’s Why That Might Work.

Almost every semiconductor stock has soared over the last year. But one Wall Street analyst thinks the real opportunity lies in the names that haven't moved yet.

Citrini Research may not be a household name like Goldman Sachs, but the macro-focused firm grabbed attention earlier this year with a viral blog post titled “The 2028 Global Intelligence Crisis.” That dystopian thought experiment imagined a future where AI destroys jobs and reshapes the economy—and it spooked investors enough to send software stocks tumbling.

Now, in a post on X, Citrini has floated a surprisingly simple theory for picking chip stock winners: just look for the ones that haven't surged yet.

Based on recent sector rotation, the logic holds up. Nvidia was the original AI flagbearer, but momentum shifted to memory chip makers like Micron last year. More recently, CPU stocks like Intel, AMD, and Arm have taken the baton. Intel, for instance, hasn't reported blockbuster growth yet—revenue rose just 7% in its latest quarter, with guidance for 11% growth—but even a hint of a turnaround was enough to send shares bouncing.

So what's next? According to Citrini's theory, the answer lies in the laggards. Out of 57 semiconductor companies with market caps above $300 million, only two have posted negative returns over the past year. And only two have gained less than 25%: Wolfspeed (Nasdaq: WOLF) and Skyworks (Nasdaq: SWKS).

Wolfspeed is best known for filing for bankruptcy last year, but after cutting its debt burden by 70% and extending maturities, the company has improved its financial health. The stock has surged over the last month alongside the broader chip rally. Still, the company is losing money—gross margin was negative 27% in its latest quarter—though its AI data center applications business is showing growth. It remains a high-risk bet.

Skyworks, meanwhile, has missed the rally entirely. The company reported essentially flat revenue in its most recent quarter, weighed down by exposure to the sluggish smartphone market. But if Edge AI—AI processing on devices like phones—takes off, Skyworks could be well-positioned to capitalize.

Other candidates include Qualcomm (Nasdaq: QCOM), another smartphone chip leader that has recently started to move. Qualcomm is expected to be a key player in Edge AI thanks to its Snapdragon platform, and it's reportedly working with OpenAI on processors for “AI agent” smartphones. Like Skyworks, Qualcomm has struggled to grow revenue, but investors are starting to see AI tailwinds.

“This is classic late-cycle rotation,” said Mark Chen, a portfolio manager at a Boston-based tech fund. “The easy money in Nvidia was made two years ago. Now you're looking for names that have been left for dead but have a real AI angle. Skyworks and Qualcomm fit that bill—if Edge AI actually materializes.”

Not everyone is convinced. “This is the kind of theory you come up with when you've run out of good ideas,” said Linda Torres, a retail investor and frequent commentator on stock forums. “Buying Wolfspeed because it hasn't gone up yet? That's like picking up pennies in front of a steamroller. The company is still bleeding cash. It's a hope trade, not an investment.”

Picking individual winners from the laggard basket isn't easy, but the theory seems to be gaining credibility as AI spreads beyond data centers into edge devices. The recent surges in Qualcomm, Texas Instruments, and GlobalFoundries suggest that a basket of overlooked chip stocks could outperform over the next year or two.

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Jeremy Bowman has positions in Micron Technology and Nvidia. The Motley Fool has positions in and recommends GlobalFoundries, Micron Technology, Nvidia, Qualcomm, and Texas Instruments. The Motley Fool has a disclosure policy.

This article was originally published by The Motley Fool.