David Prince
US Equity/Options Fund Manager, Mentor at T3 Live
With Nvidia no longer the market leader for months, how Micron, SanDisk, Lumentum, Intel, Nebius, Rocket Lab, Bloom Energy and Arm hold up is key to this bull market. The macro picture makes it hard to see another group taking the lead: software, biotech and homebuilders look like a source of funds for no more than a trade until the bond market is friendlier. Several of these leaders bounced well in front of the 21-day moving average. x.comÂ
SanDisk, Micron and Western Digital still have one last spike left as shorts and put holders cover, even though the stocks are overbought. Targets for that move are about $1,500 for SanDisk, $710 for Micron and $495 for Western Digital. x.comÂ
Micron and Sandisk will reprice hard until they reach fair value, as successive AI bottlenecks aggressively reprice public companies over the next decade. Mispriced bottleneck companies should outperform Nvidia, which will still go up. Once Micron and Sandisk reach fair value, holding them will carry the same opportunity cost as Nvidia, so the next bottleneck is the one to find. x.comÂ
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.comÂ
Semiconductors look relatively cheap against the S&P 500, while their earnings are growing much faster, barring an EPS reset. The selloff looks overdone, though that does not mean it reverses tomorrow. x.comÂ
Micron and Nvidia are cheap because they combine enormous earnings growth with low forward P/Es. Together they are expected to account for about 35% of S&P 500 third-quarter earnings growth. x.com x.comÂ
Micron is a cyclical, and cyclicals should never be bought at low P/Es and record earnings. x.com x.comÂ
Sandisk's new multi-year contract model should change how the market values it and bring multiple expansion. The earnings call introduced flexible 1-, 3- and 5-year contracts that customers must keep paying for even if they no longer need the products; the contract is locked in, the price is not. That is no different from a SaaS subscription, yet SaaS firms with much lower growth and margins get far higher P/E multiples while Sandisk is capped as a cyclical. The results were mostly priced in. … Show more
Micron and SanDisk could get automatic buying support if they bounce next week, because put-side implied volatility skew is at an all-time high. That setup would add vanna and charm buying flows into options expiration. Kioxia and SK Hynix already tested their 50-day moving averages in Asia and bounced strongly. x.comÂ
Micron Technology looks expensive on cyclical-earnings rules. Benjamin Graham warned that cyclical companies look cheapest at the peak of the cycle, when earnings are highest, and advised paying no more than 15 times the average earnings of the last three years. Setting forward earnings aside, Micron's average P/E over the last three years is 37.25. x.comÂ
Memory stocks are very cheap on P/E ratios even if the rate of their earnings growth has peaked. Big earnings growth still lies ahead, and big cash flow makes big buybacks likely, supporting significant new highs after this correction. SMH is in corrective mode before moving higher toward the raised $850 target, up from $800. x.com x.com x.com x.comÂ