Microchip Technology (MCHP) in Madison Mid Cap Fund's Q2 2025 Investor Letter and AI Investment Opportunities
In its second-quarter 2025 investor letter, Madison Investments' Madison Mid Cap Fund highlighted Microchip Technology Incorporated (NASDAQ:MCHP). The fund returned 5.2% compared to the 8.5% increase for the Russell Midcap Index during the quarter. The letter also discussed the company’s perspectives on the semiconductor cycle and its impact on specific holdings.
Microchip Technology's Performance and Outlook
Microchip Technology Incorporated (NASDAQ:MCHP), a manufacturer and distributor of smart, connected, and secure embedded control solutions, was among the top five contributors to the fund's performance during the second quarter. However, the one-month return of MCHP was -4.96%, and its shares lost 15.46% of their value over the last 52 weeks. As of September 19, 2025, Microchip Technology Incorporated (NASDAQ:MCHP) stock closed at $65.15 per share, with a market capitalization of $35.16 billion.
"The top five contributors for the quarter were Amphenol, Microchip Technology Incorporated (NASDAQ:MCHP), Arista Networks, MKS, and Liberty Formula One. Microchip and MKS both benefited from improved sentiment regarding the semiconductor cycle. Microchip’s CEO boldly predicted that the business has bottomed for this cycle, while MKS’s quarterly report showed signs of end markets picking up."
Hedge Fund Interest and Alternative AI Investments
While Microchip Technology Incorporated (NASDAQ:MCHP) is held by a number of hedge funds, there are varying perspectives on its potential. According to Insider Monkey's database, 54 hedge fund portfolios held MCHP at the end of the second quarter, down from 56 in the previous quarter. The article suggests that certain AI stocks might offer greater upside potential with less downside risk compared to Microchip.
The AI Energy Boom and a Potential "Backdoor" Investment
Artificial intelligence is creating unprecedented demand for energy, potentially straining global power grids. One company, overlooked by most AI investors, may offer a unique opportunity. This company, owning critical nuclear energy infrastructure assets, is positioned to benefit from the increasing energy needs of AI data centers. They also possess the ability to execute large scale EPC (engineering, procurement, and construction) projects across the energy sector.
Key Tailwinds: Energy, Tariffs, and Onshoring
This specific company is set to profit from the AI-driven energy demand. Furthermore, it's poised to benefit from Trump-era tariffs which encourage onshoring of manufacturing. Additionally, it plays a crucial role in U.S. LNG exportation and holds a large equity stake in an AI company. It also boasts a debt-free balance sheet with a substantial cash reserve. These tailwinds coupled with less than 7x earnings (excluding cash) makes this company an attractive opportunity for the investment community.
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