u/Johnny_Yukon ·
Reddit — r/ValueInvesting
· May 11, 2026 at 01:16
· ⬆ 16 pts
· 💬 28 comments
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AI Summary
Summary
The author reviewed ~30 companies across the AI infrastructure stack (power, cooling, networking, optical, memory, packaging, equipment) and found almost all overvalued or with poor fundamentals.
The only name with a clear value case is TSMC (TSM): 20x forward earnings, 41% revenue growth, 46% net margins, 36% ROE, and a monopoly on advanced chip fabrication.
The post is well-researched due diligence: the author spent a month analyzing multiple layers, provides specific multiples and margin data, and acknowledges risks.
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Spent the last month going through every layer of the AI infrastructure stack. Power, cooling, networking, optical, memory, foundry, packaging, equipment. Roughly 30 companies. I wanted to find value somewhere in the chain… I mostly failed.
Power and cooling names like Vertiv are trading at 70x trailing earnings. Optical networking companies like Coherent, Lumentum, and Ciena are up 200-400% in 12 months with gross margins that don’t justify the multiples. Fabrinet is a great business but runs on 12% gross margins at $700 a share. Amkor looked interesting at $30 but doubled to $70 in a few weeks with insiders dumping nearly a billion dollars of stock on the way up.
The only name I can build a real value case for is TSM. 20x forward earnings on 41% revenue growth, 46% net margins, 36% ROE, and a literal monopoly on advanced chip fabrication. The business would be cheap at 25x. At 20x it feels like a gift considering every dollar of AI capex flows through their foundries regardless of who wins the chip design war.
Am I missing something? Is there a layer of the stack that hasn’t been driven up yet? Anyone finding value here or has the market priced in the entire AI buildout already?
TSM trades at 20x forward earnings with 41% revenue growth, 46% net margins, 36% ROE, and a near-monopoly on advanced fabrication. Every dollar of AI capex ultimately flows through TSM’s foundries regardless of chip design winners, making it the most direct and undervalued play in the AI supply chain. At 20x earnings, TSM offers a rare value entry in a frothy sector; the author would consider it cheap even at 25x. Geopolitical tensions (Taiwan), cyclical semiconductor downturn, or a slowdown in AI capex could compress multiples.