Microchip Technology Incorporated (MCHP): A Bull Case Theory

We came across a bullish thesis on Microchip Technology Incorporated on Value & Momentum by Denis D.’s Substack. In this article, we will summarize the bulls’ thesis on MCHP. Microchip Technology Incorporated's share was trading at $80.75 as of February 11th. MCHP’s trailing and forward P/E were 31.39 and 30.96 respectively according to Yahoo Finance.

Microchip Technology Incorporated develops, manufactures, and sells smart, connected, and secure embedded control solutions in the Americas, Europe, and Asia. MCHP is navigating a severe cyclical downturn after a brutal inventory-driven correction, but its long-term fundamentals remain intact. Headquartered in Chandler, Arizona, the company provides embedded control solutions across automotive, industrial, computing, and communications markets through its Semiconductor Products and Technology Licensing segments.

Its Total System Solutions (TSS) integrate hardware, software, and services to improve customer outcomes, and its proprietary SuperFlash memory licensing adds recurring revenue. Despite a strong product portfolio and loyal customer base, MCHP has faced a significant collapse in profitability: Q4 FY2025 revenue fell 27% to $971M, EPS dropped 81% to $0.11, and net margins shrank from 23.7% to 1.2%, driven by overbuilt inventory, demand pullbacks, and underutilized manufacturing capacity.

Structural pressures were compounded by the closure of Fab 2, paused expansion at Fab 4 and 5, and leadership upheaval with founder Steve Sanghi returning as CEO in crisis mode. China exposure, trade tensions, and domestic competition pose additional headwinds. Recent developments offer tentative hope: book-to-bill ratios exceeded 1.0 for the first time in three years, inventory reduction initiatives are underway, cost savings from Fab 2 closure and headcount reductions total $115M annually, and Q2 FY2026 revenue guidance was raised to $1.149B.

Analysts have modestly upgraded MCHP, though insider selling and mixed congressional activity signal caution. The path to recovery hinges on normalized customer inventory, consistent order growth, and margin restoration. While near-term volatility is high, MCHP’s established market position, proprietary technology, and manufacturing footprint suggest that, if execution stabilizes, the stock could see a meaningful rerating. Investors are thus presented with a “prove it” scenario where disciplined execution and timing are critical to realizing upside.

Previously, we covered a 

 on Microchip Technology Incorporated (MCHP) by Serhio MaxDividends in May 2025, highlighting its leadership in microcontrollers, fab-lite model, and strong free cash flow. MCHP’s stock price has appreciated by approximately 32.8% since our coverage. Denis D. shares a similar bullish view but focuses on the cyclical downturn, inventory challenges, and near-term execution risks affecting recovery.

Microchip Technology Incorporated is not on our list of the 

. As per our database, 56 hedge fund portfolios held MCHP at the end of the third quarter which was 54 in the previous quarter. While we acknowledge the risk and potential of MCHP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MCHP and that has 10,000% upside potential, check out our report about this