One Wall Street firm found an early holiday gift under the tree this year. It came wrapped in a 38% crash in chip stocks.

The PHLX Semiconductor Index, which tracks 30 of the largest U.S.-listed chipmakers, closed at 9,011 on Nov. 5. That left it 38.4% below its June 22 record close of 14,635.

The index rebounded 4.2% on Friday and 6.9% on Monday. Even so, it still sits 31% below that peak.

At those prices, the group trades at just 9 times consensus 2028 earnings, according to Cantor Fitzgerald.

Two banks are looking at the same selloff, and they reach very different conclusions. Cantor wants investors to buy now. Bank of America, meanwhile, says the bottom may still be a quarter away, and that policymakers in Washington and in state capitals will decide when it arrives.

Cantor Says the Selloff Should Be Bought

“It’s officially time to get your shopping lists ready,” Cantor Fitzgerald semiconductor analyst C.J. Muse said in a note this week.

Muse described the slide as “a mid-cycle correction that should be bought,” adding that it came “with thanks given for the early holiday gift.”

The damage has been far deeper than the index suggests. Memory stocks have fallen 57% from their peak. Small and mid-cap equipment makers are down 56%, as are large-cap equipment names. Compute and networking stocks have lost 39%, while analog and foundry names are down 32%.

As a result, valuations have collapsed across the board. On 2028 consensus estimates, memory trades at 3 times earnings and compute and networking at 11 times. Large-cap equipment stands at 15 times.

According to Cantor, the fundamentals point the other way. Compute remains sold out, lead times across the supply chain keep getting longer, and visibility now stretches well into 2028.

Muse also took on the political fear directly. Democrats won control of both the House and the Senate in the Nov. 3 midterm elections, and several winning candidates backed tighter rules on data center construction.

“AI is the driver of global GDP today, and without it, we will be in a recession in the U.S.,” Muse said, adding, “We think no party would want this.”

Muse’s top picks include Micron Technology Inc. (NASDAQ:MU), Nvidia Corp. (NASDAQ:NVDA), Broadcom Inc. (NASDAQ:AVGO), Advanced Micro Devices Inc. (NASDAQ:AMD) and ASML Holding N.V. (NASDAQ:ASML).

Still, Cantor acknowledged the obvious objection.

“We understand low multiples on cyclical earnings can be a value trap,” Muse said. In the analyst’s view, though, sold-out capacity and extended lead times support the 2028 estimates.

Bank of America Sees a Storm Before the Calm

Bank of America analysts led by Vivek Arya read the same data with a different clock.

The bank noted that the index fell 38% in just 136 days. That is deeper than the 32% average decline across the last four chip downturns, and it played out in just over half the usual 253-day duration.

“Cycle analysis says we could be within 1 quarter and 12% of a trough, with DC policy clarity and Semi buybacks as catalysts,” Bank of America Global Research said in a recent report.

The bank also measures value differently. Instead of 2028 estimates, it uses the next 12 months, where the index trades at 13.7 times earnings. That is a 22% discount to the S&P 500, but still above the historical trough of about 12 times.

The real issue is the earnings figure underneath the multiple, and policy can shrink it.

According to Bank of America, if cloud spending simply holds at its current fourth-quarter pace, 2027 capital expenditure would reach about $1.2 trillion and 30 gigawatts of capacity. Consensus currently expects $1.55 trillion and 40 gigawatts.

In the bank’s stress test, a 20% cut in spending would lower AI chip sales by more than 20%. Earnings per share for AI-focused chipmakers would then fall 35% to 40%.

In other words, a 9 times multiple only stays cheap if the 2028 earnings actually arrive.

Bank of America does not see the policy shift as purely negative, however.

“A slowdown in certain states isn’t entirely negative; slower 2027 capex could elongate the cycle,” Bank of America Global Research said, adding that headwinds in one state could boost demand elsewhere.

The bank said Nvidia, AMD and Broadcom look well positioned if a trough forms in the first quarter of 2027. It also listed buybacks as a catalyst, including Lam Research Corp. (NASDAQ:LRCX)‘s $25 billion program and a Micron repurchase plan starting Dec. 9.

Same Stocks, Different Timing

Both banks favor the same AI leaders. Where they disagree is on the timing.

Monday’s trading showed both views at work. Micron closed at $733.15, up 6.3%. Nvidia, by contrast, fell 4.3% after its board opened an independent investigation into a reported foreign intelligence effort targeting CEO Jensen Huang.

The VanEck Semiconductor ETF (NASDAQ:SMH) closed at $487.41 on Monday, up 5.1% on the day. The fund remains 27% below its record high, yet it is still up 32% so far this year.

SMH Price Action: VanEck Semiconductor ETF shares were down 1.37% at $480.74 at the time of publication Tuesday, according to market data.