Institutions miss the semiconductor growth trade
The guest argued that major semiconductor companies remain undervalued relative to their massive earnings growth because institutional investors missed the initial run and are hesitating to buy at current levels.
The argument
The guest pointed to Micron trading at a low forward multiple despite high growth, and Nvidia's low PEG ratio relative to its 70% earnings growth. He argued that institutions are waiting for a pullback or recession, leaving these stocks underpriced relative to the ongoing AI build-out.
The thesis, stress-tested
✓ What validates it
- ✓DRAM prices stabilizing or rising next quarter
- ✓Institutional inflows increasing as managers capitulate and buy at current levels
▸ Risks discussed
- ▸A speed crash where market falls and DRAM prices drop 30%
- ▸Short-term underperformance relative to software
Hear it yourself
"In the exponential world, things move at an exponential pace, and that is a parabola. So the IQ going up, the the annualized run rate going up, adoption going up. There is a fundamental basis for this. And before everyone starts to go into this is the .com bubble, demand is ahead of supply right now, and that's the big story. Did you see the clip of Dario Modi, sitting on stage talking about why they did the deal with, SpaceX? And he basically was like, you know, we planned our business for, two or three x, and then we went all the way out and said the outlier would be if we could 10 x our business."
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