Up 32% Over the Last Year, Will Microchip Technologies Shares Continue to Climb?

Chip Sector Surges in 2025 on AI and Memory Growth

Semiconductor stocks experienced a robust rally in 2025, fueled by advances in artificial intelligence and increased demand for memory products. The Philadelphia Semiconductor Index ($SOX) soared over 40% as investors anticipated a surge in data center investments. According to Mizuho, ongoing expansion in AI infrastructure, cycles in wafer fabrication equipment, and memory enhancements are expected to sustain this positive trend.

Microchip Technologies: A Standout Performer

Amidst this optimistic environment, Microchip Technologies (MCHP) has distinguished itself. Over the past year, MCHP shares have risen by more than 32%. The company’s outlook brightened further when Mizuho identified Microchip as a top semiconductor pick for 2026, highlighting its strong presence in wafer fabrication and AI-related demand.

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With valuations in parts of the U.S. semiconductor industry still seen as reasonable, investors are considering whether MCHP can maintain its upward trajectory.

Overview of Microchip Technologies (MCHP)

Microchip Technologies is a diversified semiconductor company, specializing in embedded controllers, microcontrollers (MCUs), and analog as well as mixed-signal chips. Its “Total System Solutions” strategy integrates a broad range of hardware and software, targeting fast-growing sectors like automotive, IoT, and data centers.

The company has introduced products aimed at capitalizing on the AI boom. In late 2025, Microchip launched the world’s first 3nm PCIe Gen6 switch chip, designed for high-speed AI connectivity, reinforcing its leadership in advanced chip technology. Additionally, Microchip developed custom firmware for Nvidia’s DGX Spark AI supercomputers, optimizing its MEC1723 embedded controller for secure boot and power management in Nvidia’s AI servers. These initiatives highlight Microchip’s pivotal role in the next generation of AI infrastructure and its alignment with industry trends.

Throughout 2025, MCHP shares have outperformed many competitors. The stock is currently trading around $74, close to its 52-week peak of $77.20. Its 50-day moving average remains below the current price, suggesting continued strength.

However, this impressive run has led to a high valuation. Microchip’s adjusted price-to-earnings (P/E) ratio is approximately 125, significantly higher than the sector average. This suggests that investors have high expectations for the company’s future growth in both revenue and earnings.

Microchip Reports Strong Second Quarter Results

Microchip recently delivered quarterly results that surpassed expectations, impressing analysts. The company reported net sales of $1.14 billion, exceeding projections. Although revenue was down about 2% year-over-year due to ongoing inventory adjustments by customers, sales increased 6% sequentially, indicating potential stabilization in the market.

On a GAAP basis, earnings were modest at $0.03 per share, but non-GAAP earnings were stronger at $0.35 per share, compared to $0.46 a year earlier. Gross margins remained robust at around 56.7%, and expenses were well managed. EBITDA margins stayed above 20%, and Microchip generated $51.6 million in free cash flow after capital expenditures.

Looking forward, management’s guidance for fiscal Q3 2026 suggests further margin improvements. Executives reaffirmed their long-term goal of achieving a 40% operating margin, highlighting the company’s operational leverage as demand recovers.

Analyst Perspectives on MCHP Stock

Analysts are split on the short-term outlook for Microchip. Some, like Goldman Sachs, rate the stock a “Buy” with a price target of $88, citing confidence in its AI business and valuation. Needham and Stifel also maintain “Buy” ratings, recently raising their targets to around $77 and $80, respectively. On the other hand, Morgan Stanley and Wells Fargo are more cautious, assigning “Hold” ratings with targets in the high $60s or below, pointing to uncertainty about the timing of a full recovery. Mizuho maintains an “Outperform” rating with an $83 target.

Among 24 analysts covering the stock, the consensus is a “Moderate Buy.” However, the current share price is nearly equal to the average target of $77.43. The highest analyst target is $88, implying only a 19% potential upside. As a result, while Microchip’s long-term outlook remains favorable, its premium valuation leaves little room for error in the near term.