Key insights
- An investor sold half of their semiconductor ETF (SMH) holdings due to concerns about high valuations relative to growth, particularly for companies like Intel. While remaining bullish on specific stocks like TSMC and Nvidia, they express caution about the sector's overall reliance on future growth expectations and potential margin compression in the memory business (Micron).
Yesterday I checked the quarterly eps and revenue growth of smh holdings and realized that more than half of the semi stocks are overpriced based on my criteria. I find holding companies with 40+ FW PE and 15% revenue growth insane. It wasn't easy though, in 4 years my position grew 4x and it was one of my best investment if not the best.
I'm still holding some semi etf and still bullish on tsm and nvidia but the sector as a whole is becoming more and more based on dreams and hopes that the endless demand will continue forever.
Intel, which is 8% of the smh etf is the most insane. They failed at manufactoring, failed at innovating and now suddenly they will take over amd and tsmc. They had 7% growth rate last quarter and has a 80 FW PE ratio.
Micron which has a way lower forward PE and huge growth went from below $100 to $800 in a year. Even tho numbers seem great, the competition in memory business is brutal. IMO long term demand will drop while the new factory buildout grows, margins will fall and eps will crunch.