GLOBALFOUNDRIES Inc. (NASDAQ:GFS) is as a semiconductor foundry whose chips can be found in a wide range of electronic devices like smartphones, laptops, automobiles, and smart speakers, among other things. They can also be used to power AI and 5G technologies.
GFS share price has not exactly had an easy time on Wall Street, falling by close to 25% over the past 3 years, and over the past year, it is down by about 28%. But it has risen by close to 24% over the past month after its latest quarterly report injected some confidence in investors.
It is trading at a reasonable valuation with price sitting at 24.39x forward non-GAAP earnings, which is a little bit higher than the current industry average, and at 3.18x its forward sales.
Is GLOBALFOUNDRIES on the verge of a breakout? We dig deeper.
What Is Going On in the Semiconductor Market?
There are concerns about a potential slowdown in semiconductor sales this year as excess inventory accumulation following a sharp ramp in production now sits on shelves.
The trend in the industry is somewhat bifurcated. On the one hand, data centers and AI-related operations are growing like a weed. On the other, the conventional chip sector supplying chips for electronics are showing signs of stalling growth.
There is also the factor that the Chinese AI-developing company DeepSeek made it clear to the world that advanced AI models can be made with fewer advanced chips so there is some trepidation about the chip industry’s growth this year.
According to one projection, the global semiconductor industry will grow by 9.5% this year. Despite subdued sentiments about the industry’s prospects, it remains on a steady growth track.
Still, the issue of tariffs looms large. Although semiconductors are exempt from the Trump administration’s tariff, a probe was launched into the sector last month, which includes chip components and chipmaking equipment.
Tariffs might be imposed to reduce reliance on imports and, if so, they are forecasted to cost more than $1 billion a year for U.S. semiconductor equipment makers.
CEO Switch at GLOBALFOUNDRIES
GFS recently had a leadership change when Tim Breen succeeded Thomas Caulfield as the new chief executive officer.
Caulfield was appointed as the executive chairman of the Board and remains quite optimistic about the knock-on effect of tariffs on foreign-made chips.
GLOBALFOUNDRIES has been the recipient of the support provided towards domestic chip manufacturing in the CHIPS and Science Act.
Last year, the company announced that it would receive up to $1.5 billion in direct funding to support its New York expansion plans. It received an additional $9.5 million in Federal funding to manufacture essential gallium nitride (GaN) on silicon semiconductors at its Vermont facility.
Supported by these investments, the company announced its plans to open a new center for advanced packaging and testing of essential chips made within the U.S. within its New York manufacturing facility. Hence, it clearly sees an opportunity in the tariffs and aims to ride on the wave of domestic production.
Can GLOBALFOUNDRIES Stage A Comeback?
GLOBALFOUNDRIES had mixed results in its latest reported quarter when net revenue rose by 2% year-over-year to $1.59 billion, but this figure also indicated a sequential decline of 13%. Gross profit fell by 10% from the prior year’s period to $385 million.
Net income leaped higher by 57% year-over-year to $211 million, while on an adjusted (non-IFRS) basis, it spiked by 9% compared to the prior year’s value to $189 million.
GLOBALFOUNDRIES is burning cash at the moment and cash from operating activities tumbled by 32% from the year-ago value to $331 million.
So, while the company remains a top name in chip foundries and a shifting focus towards domestic production is a potential tailwind, its mixed bag results give us pause. Wall Street analysts see about a 9% upside in the stock for now, so investors might have to wait some more for a breakthrough.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
