Bill 'Latency Lord' Brennan
Fundamental Growth Investor, B2B/Sector Leaders & Picks-and-Shovels
Semiconductors will be much higher in 12 months if the market's real doubt is whether this cycle lasts another year. The cycle feels like the bottom of the third inning while the market prices a seventh-inning stretch, which is why so many chip names look like must-owns at these valuations. In order of preference: Nvidia, Credo, Astera Labs, Lumentum, Broadcom, TSMC, Coherent, Marvell, then SK hynix and Micron. x.com
Semiconductors are not in a bubble, while software is in far more of one. GAAP multiples are night and day apart, and semiconductor earnings look set to keep accelerating in many pockets after a historic run. Semis are not as cyclical as assumed, with some companies barely cyclical at all, and software is not as secular as assumed. Semiconductor ETFs have far outperformed the Nasdaq 100 since inception, and rotating from software into semis makes sense. x.com x.com x.com x.com
Semiconductor leaders look better placed than high-beta stocks with poor company models. TSMC, ASML, Nvidia and memory should lead the sector and belong in the buy basket, with Broadcom not far behind. The CPU basket is only a hold: much of its upside was priced in during Intel and AMD's run. x.com
The semiconductor sector's bloat makes selectivity important. Nvidia, TSMC and ASML are among the best businesses still worth owning, but not every name will recover from this month's selloff. Chasing unprofitable, highly leveraged small caps should be a lesson from the selloff. x.com
Semiconductor trade faces a capex growth ceiling even if AI delivers what bulls expect. Spending cannot compound at 70-100% a year indefinitely, and compute per dollar roughly doubles every two years, so the same budget buys more capacity later. Today's chip valuations also demand years of 20% AI earnings growth beyond 2028: roughly 10.9 extra years for AMD, 8.9 for ASML, 7 for Marvell and 6.4 for TSMC, versus 1.6 for Broadcom and 0.8 for Nvidia; Micron needs none under the chart's assumptions. … Show more
Semiconductors could capture scarce spot compute's value if its forward curve holds. Compute trades in deep contango, while chip stocks price in little of that value; near-term moves are unpredictable. That makes the sector very bullish. The earlier lab-funding risk looks less acute: Anthropic should hold nearly $200B cash after its IPO and is operating-cash-flow profitable. Even with 2029 capex cuts, chips look cheap if future buyers do not default. x.com x.com x.com x.com x.com
Some semiconductor stocks have returned to reasonable valuations as fundamentals improve, making recent declines buying opportunities. Many had traded at two to three times their median valuations; the correction brought some back toward normal, while sustained AI spending should benefit suppliers for years. x.com
Semiconductors still look likely to lag on a risk-adjusted basis, even if Treasury intervention such as yield-curve control changes the broader picture. They should have been rallying hard this week and are not acting right for bulls, suggesting something is brewing, probably a capex disappointment. Hyperscalers may be closer to another leg up. x.com x.com x.com
Semiconductors could stay undersupplied for a long time as more capable AI per dollar creates more uses and drives compute demand. Micron and NVIDIA trade at low forward P/Es because investors fear peak cyclical earnings, yet current earnings show no slowdown. Shortages may worsen as AI adoption spreads, though the industry could remain cyclical; a reversal of the forced rollover trade is hoped for, not assured. x.com x.com x.com
Low PEG ratios and continuing AI demand make leading AI stocks attractive after rolling corrections. Nvidia is at 0.39x PEG, Amazon 0.64x, Broadcom 0.66x, Micron 0.73x, Oracle 0.59x and TSMC 0.41x. This usually signals at least a local bottom, possibly a major one; midterm-year seasonality helps into year-end. Nvidia, Broadcom and Amazon remain favorites; Micron and TSMC look buyable on dips. Low PEG can mislead if growth slows or estimates are wrong. x.com
Semiconductors look quite overheated over a five-year horizon and are a high share of the S&P 500, while energy and defense are underweighted. Energy and defense, especially counter-drone, offer more potential over five years. @OutspokenGeek cautions that oil could fall after a 20% energy run on the Hormuz crisis. x.com x.com
Massive moats and great profit margins make solid semiconductor names worth buying on the dip. x.com
