Beyond Micron. Why TSMC Might Be the Bigger Value Play in Semis as the Cycle Broadens

Semiconductor equities have risen dramatically, with Micron up 865% in a year and Sandisk gaining more than 4,000%. The rapid run-up prompts questions about whether semiconductors behave like commodities that boom and bust, making chasing overheated sectors less attractive. Micron’s valuation is presented as mixed: a forward P/E of 9.0 is described as low for the stock, while the price-to-sales multiple is 9.11, which is not cheap. The key uncertainty is whether the AI-driven memory boom is a temporary cycle or a longer-lasting shift. Concerns also remain about potential front-loading of DRAM demand, which could cause future demand drop-offs and create a possible value trap. Taiwan Semiconductor is suggested as a more durable value option.

"With Micron ( NASDAQ:MU | MU Price Prediction) up 865% in the past year, surging into the $1 trillion club, and Sandisk ( NASDAQ:SNDK) gaining more than 4,000% in the past year, it feels like it's just a matter of time before the meteoric rise comes falling back to earth. At the end of the day, aren't semiconductors just commodities that are prone to booming and busting? Why buy the names now that much of the boom is already in the rearview mirror?"

"While I understand the "value" argument, even for a name like Micron, which trades at a ridiculous 9.0 times forward price-to-earnings (P/E), it is worth noting that cyclical stocks tend to appear the cheapest in the latter stages. The price-to-sales (P/S) multiple might be a fairer gauge for a booming DRAM play like Micron. Today, shares go for 9.11 times P/S."

"That's not obscenely expensive, but it's not cheap, either. It all comes down to whether the AI-driven memory boom is actually a cycle or something more. Only time will tell. But given the bullish analysts who expect more big things from the name, I do understand why one would perceive Micron as still a value play and a winner poised to keep on winning."

"As firms continue hoarding DRAM like it's toilet paper during the start of the pandemic, questions linger as to whether there's concern of front-loading that might lead to a demand drop-off at some point down the road. In other words, it's hard to tell if the single-digit forward P/E is a real value or a value trap."

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