What happened

Shares of GlobalFoundries (GFS -3.54%) were rallying today, up 7.9% as of 2:47 p.m. ET.

The semiconductor foundry company, which concentrates on specialty lagging-edge technologies mostly for mobile, auto, and industrial applications, reported stronger-than-expected growth and provided a better-than-feared outlook. That seemed to calm investor fears over the depth of the current semiconductor downturn.

So what

In the third quarter, GlobalFoundries grew revenue 23.5% to $2.1 billion, with non-GAAP (adjusted) earnings per share of $0.67 growing 857% year over year and 16% quarter over quarter, and also beating expectations. Furthermore, management guided to fourth-quarter revenue between $2.05 billion and $2.1 billion, versus analyst expectations of $2.08 billion. Although that revenue guidance was only in line with expectations, management guided to adjusted EPS between $1.24 and $1.44, versus consensus of just $1.

Those results were likely better than feared, especially given some of the ugly numbers reported out of certain semiconductor companies this earnings season. GlobalFoundries actually gets half its revenue from smart mobile device chips, and some leading mobile companies like Qualcomm forecast a down quarter in the fourth quarter, as low demand is leading to inventory adjustments at mobile phone original equipment manufacturers.

GlobalFoundries is in a pretty good strategic position, however. Rather than leading-edge production, GlobalFoundries concentrates on specialty and lagging-edge nodes. That is actually an area in which there is still a chip shortage, as lagging-edge chips for autos, industrial, and Internet-of-Things applications are still in short supply, even as there is a glut of other types of chips. On that note, management disclosed that it had "qualified a proprietary automotive [embedded non-volatile memory] product for one of the largest automotive [microcontroller unit] suppliers in the industry," last quarter.

GlobalFoundries is also geographically well positioned, as it has fabs in the U.S., Germany, France, and Singapore -- not the geopolitical hotspot of Taiwan, where a huge proportion of semiconductor manufacturing takes place.

Now what

GlobalFoundries looks like a solid bet on the future digitization of everything -- a trend that, despite the current chip downturn, should continue through the rest of the decade.

However, one thing that does give this investor pause is valuation. GlobalFoundries is growing nicely, but trades at 64 times earnings and 26 times next year's earnings estimates. GlobalFoundries' profits and margins should expand as it grows, leading to operating leverage, but it still looks a bit pricey compared with some other beaten-down stocks in the space. For instance, leading-edge giant and dominant player Taiwan Semiconductor Manufacturing only trades at 14 times earnings.

GlobalFoundries may be a popular name these days due to geopolitical concerns. If China does continue saber-rattling or even tries to attack Taiwan, the stock may rise, as it's one of the few big foundries outside the region. So, GlobalFoundries remains a way to play the semiconductor space while also hedging against that dire scenario.