Ambarella (NASDAQ:AMBA), maker of image application systems on chips (SoCs) for action cameras, connected cameras, drones, and other gadgets, has underperformed its industry peers over the past year. The stock has dropped about 10% over the past 12 months, compared with a nearly 50% rally in the Philadelphia Semiconductor Index.

That mediocre performance can be attributed to soft sales at its top customer, GoPro, pricing pressure from Chinese competitors, potential competition from Qualcomm (NASDAQ:QCOM), and its premium valuation.

An Ambarella chip floating in orbit.

Image source: Ambarella.

Ambarella trades at 30 times earnings, compared with the industry average of 26 for semiconductor equipment makers. That's a high P/E for a company that's expected to post a 29% decline in earnings this year.

Therefore, investors looking for more promising semiconductor plays should check out three other stocks instead -- Qualcomm, NVIDIA (NASDAQ:NVDA), and Texas Instruments (NASDAQ:TXN).

Qualcomm

Shares of Qualcomm, the world's biggest mobile-chip maker, have slumped about 12% over the past 12 months, because of competitive pressures on its chipmaking business and ongoing regulatory and legal pressures on its licensing business. To counter those headwinds, Qualcomm is diversifying away from mobile devices into adjacent markets such as connected cameras, drones, connected cars, and other devices.

Its Snapdragon SoCs bundle together application processors, GPUs, image application processors, and baseband modems -- making them elegant all-in-one solutions for standalone connected devices such as 4G action cameras or dash cams. It is thus a major threat to Ambarella, which produces only the image application processors.

Qualcomm's planned purchase of NXP Semiconductor (NASDAQ:NXPI) will also make it the biggest automotive-chip maker in the world and bolster its bundling capabilities. Analysts expect Qualcomm's revenue and earnings to respectively fall 2% and 6% this year as it navigates the near-term headwinds, but it trades at just 21 times earnings, compared with the industry average of 25 for semiconductor makers. Investors will also get paid a forward dividend of 4.2% as they wait for its turnaround to play out.

NVIDIA

Investors who like Ambarella's exposure to the computer vision market should check out NVIDIA, which captured a large chunk of the connected-car market with its Tegra CPUs and Drive PX platform for autonomous cars. That's why its automotive revenues surged 24% annually last quarter and accounted for 7% of its top line.

But that's not NVIDIA's only strength. Its core gaming GPU business is generating double-digit sales growth, and its data-center GPU business is posting triple-digit sales growth on the use of its GPUs for advanced machine learning tasks. That's why Wall Street expects NVIDIA's revenue and earnings to respectively grow 19% and 20% this year.

NVIDIA's Tesla V100 data center GPU.

NVIDIA's Tesla V100 data center GPU. Image source: NVIDIA.

It's also why the stock has rallied more than 200% over the past 12 months. NVIDIA's P/E of 56 looks pricey relative to its industry peers and its projected earnings growth, but investors could certainly keep paying that premium as long as the chipmaker keeps firing on all cylinders. NVIDIA only pays a forward yield of 0.3% -- but that's still more generous than Ambarella, which has never paid a dividend.

Texas Instruments

Investors who think Qualcomm and NVIDIA are too risky should check out Texas Instruments, which produces low-power analog and embedded chips instead of higher-powered chips. TI sells those chips to a wide range of customers across the automotive, industrial, communication equipment, enterprise services, and personal electronics markets.

TI maintains an industry-leading gross margin north of 60%, with a newer 300mm analog manufacturing process that reduces its production costs by about 40%. Those rising margins made TI a cash-generating machine, with its trailing-12-month free cash flow rising more than 50% over the past five years.

It's committed to returning 100% of that cash to shareholders through buybacks and dividends, and it currently pays a forward yield of 2.4%. It's raised that dividend for 13 straight years and has reduced its share count by 42% during the same period. Analysts expect TI's revenue and earnings to respectively grow 7% and 18% this year -- which are solid growth rates for a 66-year-old chipmaker. TI has rallied about 25% over the past 12 months, but its P/E of 22 remains below the industry average.

The key takeaway

I admire Ambarella's business of best-in-breed image-processing SoCs, and I believe it will eventually diversify away from action cameras and widen its moat against the competition. However, its near-term headwinds and its high valuation are hard to ignore.

Therefore, I believe that Qualcomm, NVIDIA, and Texas Instruments are probably better semiconductor plays for now. Qualcomm's a comeback play, NVIDIA's a growth play, and TI is a solid defensive play.

Leo Sun owns shares of Qualcomm. The Motley Fool owns shares of and recommends Ambarella, GoPro, and NVIDIA. The Motley Fool owns shares of Qualcomm and has the following options: short January 2019 $12 calls on GoPro and long January 2019 $12 puts on GoPro. The Motley Fool recommends NXP Semiconductors. The Motley Fool has a disclosure policy.