Paradis
AI & Technology Investment Research
NVIDIA and Broadcom could become equity safe havens if inflation rises, since their earnings are least tied to what is going wrong. Higher inflation would lift rates and sink bonds, pushing PMs into stocks with stable, visible growth from hyperscaler capex, which huge cloud backlogs mean a 25 bp hike won't slow. Those longs would be funded by shorts in consumer discretionary and homebuilders. This fails if a Trump MOU lowers oil, or if core inflation has Warsh hiking into job losses. x.com x.com
Nvidia's valuation gives too little credit to its expected long-term earnings growth. Its forward P/E-to-growth ratio is 0.28, the lowest since late 2023; the bullish read depends on those growth expectations proving accurate. x.com x.com
Rapid revenue growth against forward valuations makes Nvidia and Micron additional calculated risks after the selloff, alongside Meta, Broadcom, IREN, Vistra, Nokia and Oracle. Nvidia grew revenue 106% and guides Q3 to $108B, plus or minus 2%, at 17.5x forward earnings; Micron grew revenue 379% to $54.2B, guides $61.5B next quarter and trades at 5x. The other six retain their growth, contracted-demand or customer-order cases. x.com
Micron looks expensive on price-to-book at about 8x versus a historical average of about 2x, and relying on forward P/E for such a cyclical business can be dangerous. x.com
AI skepticism leaves Nvidia, Broadcom and Micron looking cheap on forward earnings. Their forward P/E ratios are 14, 18 and 5, respectively; the market may eventually stop doubting AI. x.com
Micron looks very cheap because the market underestimates how sustainable its earnings will be over the next few years. x.com
Micron, SK hynix and SanDisk look absurdly cheap, but the market refuses to pay more for their earnings because no one knows what sales or margins look like five years out. Today's roughly 5x earnings could prove ridiculously cheap, yet those earnings could just as easily fall until 5x becomes 20x. That raises the question of whether owning them is investment or speculation. x.com x.com
Micron deserves 10-12x forward earnings rather than 6.2x, and its latest quarter only strengthened the bull case. Revenue reached $54.23B, up 379% year over year, and EPS $33.42, up 1,003%; next-quarter guidance is $62B revenue and $38.15 EPS versus estimates of $58B and $35.92. The market fears growth and demand could suddenly stop, but no one can time when or if that happens, whether in 1, 2, 3 or 5 years. It might not deserve 20x. x.com
Nvidia's 0.39 PEG suggests its valuation is low relative to growth. Its 26.56x P/E and 17.55x forward P/E are below their respective ten-year medians of 50.36x and 26.5x. x.com
If Micron has only two years of decent forecasts, its limited visibility warrants a lower multiple, not a higher one. x.com
Micron's revenue grew faster than its stock over the past year, leaving it cheaper on trailing earnings. Quarterly revenue rose from $11.3B to $54.2B, while the stock rose from about $198 to $878 and trailing P/E fell from roughly 24x to 11.6x. x.com