Speculative Investments: Two Semiconductor Firms

The market currently exhibits the predictable behavior of a rising tide, lifting all vessels, including those of questionable seaworthiness. Amidst this general inflation of value, a few stocks remain, if not precisely cheap, then at least reasonably priced for the discerning investor. We examine two such cases, both within the semiconductor industry, a sector currently attracting considerable, and perhaps excessive, optimism.

Nvidia

Nvidia (NVDA 2.21%) has undergone a recent re-evaluation, shifting from a position of perceived overvaluation to one of relative affordability. This is not to suggest the stock is inexpensive in any absolute sense, but rather that its price has, for the moment, failed to keep pace with the prevailing enthusiasm for artificial intelligence. A forward price-to-earnings ratio of approximately 24.5, based on projections for the fiscal year ending January, descends to 19 times earnings if one extends the forecast by a single year. This is a significant, though not unprecedented, correction.

The company’s reported revenue growth of 62% in the last quarter is undeniably impressive, but such figures should be viewed with a degree of skepticism. The current demand is driven by a specific, and potentially fleeting, surge in investment related to AI infrastructure. Whether this represents a sustained structural shift or a temporary bubble remains to be seen. However, Nvidia is undeniably positioned to benefit from the current wave of spending.

The proliferation of cloud computing and the increasing reliance on AI algorithms have created a demand for powerful graphics processing units (GPUs), and Nvidia currently dominates this market. The recent announcements of increased capital expenditure by major cloud providers and AI developers suggest that this demand is unlikely to abate in the short term. Furthermore, the decision by Taiwan Semiconductor Manufacturing, a crucial supplier to Nvidia, to expand its production capacity signals a degree of confidence in the long-term viability of this market. This expansion, driven by demand from Nvidia and its customers’ customers, is a noteworthy development, but it also introduces the risk of oversupply further down the line.

Micron Technology

Micron Technology (MU 0.60%), like Nvidia, occupies a pivotal position within the semiconductor landscape. It is, however, a different sort of company, more susceptible to the cyclical fluctuations inherent in the memory market. Despite this vulnerability, the stock currently trades at a forward P/E ratio of 11 times projected earnings for the fiscal year ending August 2026, falling to 8.5 times for the following year. This low valuation is, on the surface, attractive, but it reflects the inherent instability of the memory sector.

The argument for Micron rests on the premise that the demand for memory, particularly high-bandwidth memory (HBM), will continue to outstrip supply due to the requirements of AI infrastructure. HBM, a specialized form of DRAM, is essential for optimizing the performance of GPUs. The current supply shortfall is acute, and while Micron and its competitors are increasing capacity, the process is slow and expensive. This imbalance is driving up prices and, in theory, boosting Micron’s profitability.

However, the history of the semiconductor industry is littered with examples of companies that overextended themselves in anticipation of future demand. The claim that demand will consistently outstrip supply for an extended period should be treated with caution. While Micron appears well-positioned to benefit from the current boom, the inherent risks of the cyclical memory market cannot be ignored. The long-term viability of this investment depends not only on the continued growth of AI but also on Micron’s ability to navigate the inevitable downturns that lie ahead.

2026-02-14 18:53

Nvidia

Micron Technology

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