Micron Technology Inc. (NASDAQ:MU) tops the list of the most undervalued chip stocks in October, gaining more than 460% in 12 months.

The memory chip maker trades at 6 times forward earnings. That's according to TradingView's latest screener data on the 28 U.S.-listed members of the PHLX Semiconductor Sector index.

The forward price-to-earnings ratio (forward P/E) divides the share price by the profit analysts expect over the next year. A lower number means investors pay less for each dollar of expected profit.

By comparison, the SPDR S&P 500 ETF Trust (NYSE:SPY) trades at 20.3 times next-12-month earnings.

Four chip stocks currently trade at cheaper valuations than the broader market: Micron, NXP Semiconductors N.V. (NASDAQ:NXPI), Qualcomm Inc. (NASDAQ:QCOM) and Nvidia Corp. (NASDAQ:NVDA). Microchip Technology Inc. (NASDAQ:MCHP) sits just above it.

So why is the market paying less than the index for the industry driving U.S. earnings growth?

Undervalued Chip Stocks Start With Micron's Memory Boom

Micron's largest business is DRAM (dynamic random-access memory), the short-term memory that servers, PCs and phones use to run programs.

Demand for that memory has outrun supply because of artificial intelligence. As a result, prices have surged.

Micron sold 211% more DRAM in the first nine months of fiscal 2026 than a year earlier, according to its latest quarterly filing.

Average selling prices rose about 140%, while volumes grew about 30%.

Consequently, profitability exploded.

Gross margin, the share of revenue left after the cost of making the product, reached 85% in the fiscal third quarter. A year earlier, it was 38%.

Why The Market Doesn't Trust Micron's Earnings Yet

Memory has always been a cyclical business. High prices push manufacturers to build new factories. New factories create too much supply. Then prices fall, and margins shrink.

As a result, investors tend to put low multiples on memory stocks when profits peak. A low forward P/E does not mean the market missed the boom. Instead, it signals doubt that these earnings can last.

The key question now is whether AI has changed the rules for Micron. If memory demand now grows every year, instead of rising and falling with the cycle, a multiple of 6 would be too low.

NXP And Qualcomm Are Cheap For Different Reasons

NXP trades at 14.6 times forward earnings, even as its business accelerates. The Dutch chipmaker reported second-quarter revenue of $3.5 billion, up 19% from a year earlier.

"AI is moving from the cloud into the physical world — into vehicles, factories, and robots," Chief Executive Rafael Sotomayor said in the results release.

NXP expects third-quarter revenue of $3.75 billion. However, the stock has gained only 4.58% over the past year.

Meanwhile, Qualcomm's fiscal third-quarter revenue fell 4% to $9.9 billion. Handset chip revenue dropped 20% to $5.1 billion, as Apple Inc. (NASDAQ:AAPL) shifts to its own modems.

Its automotive revenue, however, jumped 61% to a record $1.6 billion. The company targets $40 billion in non-handset revenue by fiscal 2029.

Nvidia Is Now Cheaper Than The S&P 500

Nvidia, the world's largest company by market value, trades at 19.9 times forward earnings — below the multiple of the overall index. Yet its growth is nothing like the index's.

Nvidia's second-quarter fiscal 2027 revenue more than doubled to $96.2 billion. Data center revenue rose 117% to $89.0 billion.

"AI has reached its inflection point," founder and CEO Jensen Huang said in the earnings release. "Now, compute is revenue."

The stock has risen 27.70% over the past year, while revenue grew 106%. In other words, profits have grown faster than the share price, and the multiple has compressed.

Cheap For A Reason, Or Cheap By Mistake?

A forward P/E is only as good as the estimates behind it. If memory prices fall or AI spending slows, analysts would cut their forecasts, and today's low multiples would no longer look so low.

On the other hand, if AI demand proves more durable than past chip cycles, the market may be underpricing the companies at the center of the buildout.

For now, the S&P 500 costs more than the chipmakers supplying its biggest growth story.