70% of the S&P Gains are coming from semiconductors and it's unfortunately not a bubble.
u/AceStrikeer ·
Reddit — r/ValueInvesting
· May 28, 2026 at 06:52
· ⬆ 25 pts
· 💬 45 comments
| View on Reddit ↗
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Summary
The post argues that the recent rally in semiconductor stocks (e.g., Micron, Nvidia) is driven by real revenue growth, not speculative excess, making it a cyclical boom rather than a bubble.
The author claims that falling P/E ratios (to 25–35x) alongside rising revenues create a classic value opportunity – "wonderful companies at fair prices" – and urges value investors to consider these names.
Quality assessment: This is a well-reasoned opinion piece with cited revenue growth figures, but it lacks deep fundamental analysis of individual company balance sheets or macro risks. It’s more of a sector-level thesis (speculative but grounded in data).
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Normally we simply skip bubbles. But this current bull run is based on real fundamental growths. Semiconductors are cyclical stocks.
Micron's price for example rose by over 100% in the recent months, but their revenue has increased by 50%. NVDA rose 44% in one year while their revenue has increased 71%. The list goes on...
This is not a bubble. These are CYCLICALS. Look at the car and energy boom in the 20s and 70s. Same pattern. Revenue, PE and stock price rise following a decrease in PE at the peak. Afterwards a correction happened.
Weirdly enough their PE ratio has dropped to 25-35 range.
\-> 'Wonderful companies at fair prices'
(Warren Buffet)
Isn't that what value investors supposed to buy?
Post notes that revenue for NVDA (+71%) and MU (+50%) has outpaced stock price gains, and P/E ratios have compressed to 25–35x. This combination of strong earnings growth and moderated valuations creates a potential entry point for value investors who typically avoid high-multiple growth stocks. The broad semiconductor sector (captured by SMH) appears to offer a cyclical growth opportunity with reasonable valuations, making it a candidate for a long position. Global chip demand could slow if AI capex peaks; geopolitical tensions (Taiwan/China) could disrupt supply chains; rate hikes or recession would pressure cyclical earnings.
Micron’s stock rose +100% while revenue increased 50%, implying significant earnings leverage that may continue. As a memory/storage leader, MU benefits from AI-driven HBM demand, and its cyclical upcycle may have further room given inventory normalization. The gap between revenue growth and price appreciation suggests the market has not fully priced in the earnings recovery, offering upside. Memory pricing is volatile; oversupply from competitors could hit margins; revenue growth rate may decelerate.
Nvidia’s stock rose +44% in a year while revenue surged +71%, showing earnings growth is outpacing price gains. This divergence implies the stock is actually getting cheaper on a trailing basis, contrary to bubble narratives, and the AI capex cycle still has multi-year runway. Nvidia fits the “wonderful company at a fair price” criteria, especially after recent P/E compression, making it a buy for growth-oriented value investors. Competitors (AMD, custom ASICs) could erode market share; export controls may limit revenue; valuation still high on forward earnings; GPU demand normalization.
This Reddit post, published May 28, 2026,
features u/AceStrikeer
discussing SMH, MU, NVDA.
3 trade ideas extracted by AI with direction and confidence scoring.