Microchip Technology Rises 23% as CHIPS Act Changes Cloud 2025 Valuation Outlook

Thinking about what to do with Microchip Technology stock right now? You are definitely not alone. Investors are weighing their options as this major semiconductor player sees a mix of market signals that could mean either opportunity or risk, depending on where you focus.

After bouncing nearly 23% over the past three months, Microchip’s share price currently sits at $69.14, showing resilience despite some short-term volatility. The longer-term story, however, is a bit more nuanced. For example, over the last year, the total return is down about 13%, so recent gains have not completely offset prior losses. This push and pull in the stock’s trajectory is tied not just to the company’s fundamentals, but also to what’s happening in the chip sector. This is a space known for its sensitivity to both policy changes and global trade news.

Recent news updates have added to the intrigue. Headlines range from government debates over CHIPS Act funding to potential equity stakes in key chipmakers, both of which shape investors’ risk calculations. Meanwhile, some analysts have trimmed their price targets, pointing to high expectations that might not be met by “in-line” performance, even as demand and bookings appear solid. Nevertheless, for bargain hunters, the current price sits about 11% below the average analyst price target, suggesting some upside potential, though it is far from a certain outcome.

When Microchip’s valuation is tested against six typical “undervaluation” checks, only one comes out positive, resulting in a modest valuation score of 1. With so many moving parts, it becomes clear that the usual indicators might not tell the whole story. Up next, we will break down exactly how these valuation methods stack up, and later in the article, explore a potentially more effective way to assess whether this stock deserves a place in your portfolio.

Microchip Technology delivered -13.0% returns over the last year. See how this stacks up to the rest of the Semiconductor industry.

Approach 1: Microchip Technology Cash Flows

The Discounted Cash Flow (DCF) model estimates a company’s worth by projecting its likely future cash flows and discounting them back to today’s value. This approach provides investors with an idea of the stock’s intrinsic value, based on its ability to generate cash over time.

For Microchip Technology, the most recent Free Cash Flow was $625 million. Analysts forecast steady growth ahead, with projections reaching $2.66 billion by 2030. Over the next several years, annual Free Cash Flow is expected to continue rising as product demand and efficiency gains accumulate.

According to the DCF model, Microchip’s intrinsic fair value is calculated at $60.12 per share. Compared with the current share price of $69.14, the stock appears 15.0% overvalued. This suggests the market is pricing in more optimism than the underlying cash flow growth alone would justify, at least by DCF standards.

Result: OVERVALUED

Our DCF analysis suggests Microchip Technology may be overvalued by 15.0%. Find undervalued stocks based on DCF analysis or create your own screener to find better value opportunities.

Approach 2: Microchip Technology Price vs Sales

For companies like Microchip Technology, the Price-to-Sales (P/S) ratio is a valuable tool to gauge valuation, especially when scrutinizing established firms within fast-moving sectors. This ratio is favored because it is less sensitive to one-time earnings quirks and helps investors quickly compare revenue valuations across industry peers.

Growth expectations and perceived risk play a big part in shaping what counts as a “normal” P/S ratio. If a company is expected to grow faster than its industry or is viewed as safer, investors are generally willing to pay a higher multiple for its sales. In contrast, lower growth or higher risk typically result in a lower P/S ratio.

Microchip Technology currently trades at a P/S ratio of 8.8x. This is significantly higher than the semiconductor industry average of 4.1x and is also above the peer group average of 18.3x. However, Simply Wall St’s Fair Ratio suggests that a reasonable multiple for Microchip, given its specific mix of growth, profitability, and risk, should be about 7.4x. Since Microchip’s actual P/S is noticeably above this Fair Ratio, the stock appears overvalued by this measure.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Microchip Technology Narrative

Narratives are a simple yet powerful way to approach investing, allowing you to build your own story about a company by connecting the facts that matter most to you, such as future revenue, profit margins, industry shifts, and your personal fair value estimates.

Rather than relying only on static numbers or past performance, a Narrative lets you decide how recent developments, growth trends, or risks could shape Microchip Technology’s future. This approach then links those beliefs directly to a projected financial forecast and, ultimately, an up-to-date fair value for the stock.

On the Simply Wall St platform, Narratives are an easy and accessible tool used by millions of investors. These narratives help investors act on their own insights and join a community that updates its views every time new information arrives. This can include earnings news, industry trends, or macroeconomic changes.

Your Narrative automatically compares your fair value to the current share price, making it clearer to decide if now is the right time to buy, hold, or sell. For example, some users might create a bullish Narrative forecasting $90 per share based on a big industrial recovery and rising margins, while others take a more cautious stance and set their fair value closer to $60 if they expect inventory or competition to weigh on results.

Do you think there's more to the story for Microchip Technology? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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