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Nvidia, AMD or Micron: Where the biggest risks lie in the AI ​​boom

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Published on: November 11, 2026 / Updated on: November 11, 2026 – Author: Konrad Wolfenstein

Nvidia, AMD or Micron: Where the biggest risks lie in the AI ​​boom

Nvidia, AMD or Micron: Where the biggest risks lie in the AI ​​boom – Creative image on the topic, with AI: Xpert.Digital

Chip stocks under scrutiny: Which profits could survive the AI ​​boom?

Low P/E ratio (price-to-earnings ratio), high risk: When are chip stocks really cheap?

Chip stocks under pressure: How Nvidia, AMD and Broadcom differ

The AI ​​boom is bringing chip manufacturers strong growth and high profits – but that doesn't automatically make their shares a good buy. Nvidia, AMD, Broadcom, Micron, and SanDisk profit from the demand for computing power, networking technology, and storage in different ways. At the same time, their business models, risks, and profit fluctuations differ considerably.

This is precisely why strikingly low price-to-earnings ratios can be misleading: they are often based on anticipated profits that have not yet been realized and can change with demand, prices, or competition. For investors, it's not just a matter of whether a company benefits from AI expansion. What matters is how much reliable profit remains after investments, potential bottlenecks, and competition – and whether the share price already reflects these prospects too optimistically.

Chip stocks under stress: Which profits will survive the AI ​​boom?

A decline in a company's stock price doesn't automatically make it cheap. Likewise, a competitor's rising share price doesn't prove that the balance of economic power has permanently shifted. This distinction is particularly important in the semiconductor sector: technological advancements, political interventions, multi-billion-dollar investments, and highly volatile profit expectations all simultaneously influence valuations.

Nvidia, AMD, Broadcom, Micron and SanDisk represent different ways to profit from the development of artificial intelligence: through computing power, customer-specific processors, network technology, memory or permanent data storage.

The crucial economic question, therefore, is not which stock has recently fallen or risen the most. What matters is how much reliable profit remains after investments, competition, and potential disappointments in demand. A convincing analysis must distinguish between a successful company, a promising technology, and an attractive share price. These three characteristics can coincide, but they don't have to.

The stock market is redistributing opportunities

Recent price movements initially show a reassessment of risks: On November 9, 2026, Nvidia lost approximately five percent, while AMD gained around 13 percent and Broadcom almost nine percent.

However, this does not necessarily imply a corresponding shift in revenues or market shares. A stock market session does not change existing data centers or long-term software decisions. It primarily changes the price investors are willing to pay for expected future results.

The frequently used phrase "a corporation lost billions in a single day" is also economically imprecise. When a share price falls, the company's market capitalization initially decreases. This does not automatically result in the same amount of cash flowing out of the company. Operational consequences only arise through additional channels, such as more difficult financing, less attractive stock-based compensation, or a loss of customer trust.

Conversely, rising share prices do not necessarily mean an improved buying opportunity. If a stock rises more sharply than realistic earnings expectations, it becomes more expensive. Therefore, the search for an alternative to Nvidia can be both economically sound and risky from a valuation perspective.

In addition, AMD's share price increase was not solely due to the problems of its competitor, but was also supported by a positive analyst rating.

Nvidia's business remains exceptionally profitable

The operating figures so far do not paint a picture of an economically struggling company: Nvidia achieved a revenue of 96.221 billion US dollars in the second quarter of fiscal year 2027, which ended on July 26, 2026, an increase of 106 percent compared to the previous year; the gross margin reached 75 percent and the operating profit 63.734 billion US dollars.

The data center business contributed 89 billion US dollars and grew by 117 percent compared to the previous year.

This scale illustrates a dual development. On the one hand, Nvidia possesses exceptional profitability. On the other hand, the company is heavily focused economically on an investment complex whose further development is becoming increasingly crucial.

A gross margin of 75 percent does not mean that three-quarters of revenue can be freely distributed to shareholders. The difference between gross profit and distributable cash includes expenses such as research, administration, taxes, investments, and changes in receivables and inventories. This difference can be substantial, especially for rapidly growing companies.

Nvidia projected revenue of $108 billion for the third quarter, with a margin of error of two percent.

Such a forecast indicates the demand expected by management, but it does not represent revenue already earned. Therefore, for evaluation purposes, a distinction must be made between actual results, short-term company forecasts, and long-term expectations.

Market leadership isn't just about chips

In addition to processors, Nvidia's offering includes network technology, complete platforms and a comprehensive software environment around CUDA and specialized libraries.

Economically, this relationship is more important than the isolated performance of a single semiconductor. A customer doesn't just buy computing power. They need a functioning environment in which models can be developed, operated, and further refined.

A competitor therefore doesn't just have to win on the purchase price. They must also offset potential conversion costs, additional development expenses, and operational risks. If a cheaper accelerator requires more extensive adjustments or is underutilized, the perceived price advantage can disappear.

The key metric is the total cost of reliably delivered computing power. This includes hardware, electricity, cooling, network, software, personnel, and actual utilization. A more expensive system can be more economical if it becomes productive faster or delivers a higher number of usable results.

This relationship protects an established provider, but it doesn't make them invulnerable. The greater customer spending becomes, the stronger their incentive to develop alternatives. High margins are therefore both an expression of a strong market position and an invitation to competitors to capture a portion of this added value.

Management risks are not business figures

Additional uncertainty arises from publicly discussed personal allegations against Jensen Huang and an investigation into his relationship with a former manager; a widespread suspicion of espionage in this context has not been proven, and Nvidia has stated that it has no evidence of compromised company secrets to date.

This distinction is essential for an objective business analysis. A suspicion must not be treated like a proven economic loss. Likewise, a loss of technological competitiveness cannot automatically be inferred from personal misconduct.

Relevance to company value arises when verifiable consequences follow. These could include management changes, legal burdens, security deficiencies, or impaired customer relationships. As long as the extent and occurrence of such consequences are unclear, it is an additional risk and not a quantifiable reduction in profit.

This case, however, raises a fundamental question: How dependent is a company on a single leader? A strong founder can shape strategy, corporate culture, and business relationships. This same concentration can become a valuation risk if succession, control, and decision-making structures are insufficiently secured institutionally.

In the long run, therefore, it's not just the quality of the CEO that counts. Equally important is whether the company could be reliably managed even without their daily presence.

China remains a political uncertainty factor

American export policy cannot be reduced to the simple alternative between complete opening and complete ban: In January 2026, the responsible US authority indicated that certain products, including Nvidia's H200 and AMD's MI325X, would undergo case-by-case review under security conditions.

At the end of May, it was also clarified that licensing requirements for certain advanced chips could also affect Chinese companies outside of China.

Several levels of economic evaluation result from this. First, restricted market access can directly reduce sales opportunities. Second, specially adapted products can incur additional development costs. Third, there is a risk that inventories and delivery commitments will lose value due to changed regulations.

Nvidia did not include data center revenues from China in its revenue forecast for the third quarter of fiscal year 2027 in the area of ​​computing processors.

This limits the dependence of this specific forecast on a short-term opening of the Chinese market. However, it does not eliminate the longer-term consequences of lost customer relationships or a more regionally fragmented technology ecosystem.

AMD is not automatically a protected beneficiary of stricter regulations. If export rules target technical specifications or specific recipients, multiple American suppliers could be affected. Therefore, political risks cannot be reliably avoided simply by switching from one US chip manufacturer to another.

AMD needs to scale growth profitably

AMD reported total revenue of $13.377 billion for the third quarter of 2026, representing a 45 percent increase year-over-year; reported net income was approximately $2.4 billion, with a gross margin of 54 percent.

The data center business grew by 97 percent compared to the previous year, reaching approximately 8.5 billion US dollars.

This development demonstrates considerable momentum. However, it does not prove that AMD has already achieved the same economic position as Nvidia. Furthermore, AMD's data center business encompasses both EPYC server processors and Instinct accelerators, meaning that total segment revenue cannot be equated with pure AI GPU revenue.

For AMD, a significant opportunity lies in the fact that large customers might want a second, high-performance supplier. Such an alternative improves their negotiating position and reduces their dependence on a single supplier.

However, the economic value of this role depends on the conditions. Market shares gained through high price concessions, extensive support, or sharply increasing development expenditures are less valuable than market shares with consistently attractive margins.

The crucial question, therefore, is not simply how fast AMD grows. The decisive factor is whether additional revenue, after all necessary expenses have been covered, delivers a reasonable return on the capital invested.

The challenger needs more than demand

An emerging supplier must manage several tasks simultaneously. It needs compelling products, reliable delivery capabilities, and an environment that customers can use without disproportionate effort. Furthermore, product development must progress quickly enough to prevent the technological gap from widening again.

This creates a complex financing cycle. New products require significant upfront investments. Rising sales figures can spread these costs across more units. However, if sales volume falls short of expectations, the profitability of a development program deteriorates.

For AMD, it is therefore particularly important whether initial large-scale projects translate into repeat orders. Successful trials do not yet guarantee a sustainable business. Only when customers use the systems productively, expand their deployments, and reorder the next generation will technical acceptance translate into a robust market position.

The customer base also deserves attention. Growth is less robust when it depends heavily on a few projects. A broader base of economically independent customers can reduce the risk of individual delays.

However, this operational development work may already be largely priced in on the stock market. In that case, even good growth is not enough. The results must also meet the expectations reflected in the share price.

Broadcom benefits from other leverage points

Broadcom achieved revenues of $29.591 billion in the third quarter of fiscal year 2026, 86 percent more than in the previous year; free cash flow reached $13.665 billion, or about 46 percent of revenues.

Sales of AI semiconductors amounted to US$16.7 billion, 221 percent higher than the previous year; the company cited customer-specific accelerators and network technology as key drivers.

This distinguishes the economic position from simple competition for the same standard processor. Custom semiconductors can be tailored to specific workloads. Network technology, in turn, connects the computing units and enables them to work together.

For large operators, such specialization can be attractive if recurring tasks arise on a sufficient scale. In that case, high development costs can be spread across a large volume of usage.

The other side of the coin is a stronger commitment to individual projects and customer decisions. If a major customer changes their timeline, abandons an architecture, or takes on more development work themselves, this can have significant consequences.

Broadcom also has a large infrastructure software business, which accounted for approximately US$8.75 billion, or 30 percent of the group's revenue, in the quarter under review.

This mix broadens the revenue base. However, it does not make Broadcom independent of the investment behavior of large technology customers.

Special chips change the payout distribution

The rise of custom-designed processors doesn't necessarily have to shrink the overall market for AI computing power. It can, above all, change who profits from that market.

For a data center operator, the relevant metric is not the chip supplier's margin, but the economic benefit of their own infrastructure. If a specialized processor can perform a frequently used task more cost-effectively, the incentive to develop it in-house or to enter into a development partnership increases.

This leads to new considerations. A more specialized chip may be efficient but less flexible in responding to changing models. A more universal accelerator may appear more expensive but can handle a broader range of tasks.

The economic decision therefore depends on the stability of the workload. The more predictable the applications and the greater their scope, the more likely specialized solutions are to be cost-effective. The faster models, processes, and requirements change, the more valuable flexibility can become.

For investors, it's crucial to understand that a growing AI market doesn't automatically guarantee consistent profit shares. The benefits of increased efficiency can accrue to the semiconductor developer, the data center operator, or the end customer. Revenue growth alone doesn't answer this distribution question.

Storage is not a unified market

Micron is active in both the DRAM and NAND business; HBM refers to high-bandwidth memory, while SSDs are designed for long-term data storage.

Economically, RAM and mass storage should not be considered synonymous. They perform different tasks and are not necessarily subject to the same supply and demand conditions. Therefore, high demand for a particularly high-performance storage type says little about the profitability of all storage products.

The analysis also considers whether a product is easily interchangeable or requires extensive technical adjustments. The more comparable products are, the more direct the price competition. Conversely, the higher the qualification effort and technical requirements, the greater the potential for differentiation.

Nevertheless, a more sophisticated product mix doesn't automatically eliminate the cyclical nature of production. High profits create investment incentives. If several manufacturers expand capacity simultaneously, the additional supply may later meet less dynamic demand.

The crucial question, therefore, is not whether AI needs more storage. It is which types of storage will remain scarce, how long this scarcity will last, and what proportion of today's earning power will remain after the next capacity expansion.

 

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Broadcom's strategy in the competition for custom chips

Micron's history warns against extrapolating from past experiences

The extent to which earnings can change is already demonstrated by comparing two fiscal years: Micron's revenue increased from $25.111 billion in fiscal year 2024 to $37.378 billion in 2025, while net profit rose from $778 million to $8.539 billion.

Profit reacted much more strongly than revenue. This relationship is crucial for capital-intensive companies. If large portions of costs do not rise or fall in the same proportion as revenues in the short term, price changes can disproportionately affect earnings.

This is attractive during an upswing. Improved capacity utilization and higher selling prices can quickly increase profitability. During a downturn, the same mechanism works in the opposite direction.

Therefore, it is problematic to use a particularly high annual profit as a permanent basis for earnings without verification. The reported profit may be correct, but still say little about what is earned over a complete market cycle.

For Micron, therefore, product mix, investment needs, capital commitment, and balance sheet should be considered together. A higher proportion of sophisticated storage products can improve economic performance. However, whether this will result in a permanently less volatile business model will have to be demonstrated over several market phases.

SanDisk needs its own review

SanDisk's main focus is on the development of the NAND memory market; the valuation under discussion is approximately 2.6 times the expected annual profit for 2028.

Such a figure can appear exceptionally favorable. However, it can also indicate that the market considers the expected profits to be unsustainable.

When it comes to permanent storage, a key distinction must be made between increasing data demand and increasing manufacturers' profitability. More stored data does not necessarily lead to higher profits if the price per storage unit falls faster than the production costs.

Technological advances also have a dual effect. They can reduce costs and improve competitive position. At the same time, they can increase the available supply and thus trigger price pressure.

A reliable assessment therefore requires more than the assumption that the world will generate more data in the future. It must examine how sales prices, costs, product quality, and investments develop in relation to one another.

Micron and SanDisk should therefore not be treated as economically equivalent investments solely because of their similarly low expected P/E ratios. Their respective product mixes and dependencies on individual storage markets can lead to significantly different results.

The P/E ratio hides its assumptions

For Micron, a P/E ratio of approximately three is being discussed based on expected earnings for 2028; for SanDisk, the corresponding value is around 2.6 and for Nvidia around nine.

These values ​​are not timeless characteristics of companies. They depend on the share price used, the current state of the forecast, and the definition of profit. Without this context, a false sense of precision arises.

Furthermore, the forecast horizon must be considered. An expected profit for 2028 is not a surplus already achieved. It includes assumptions about demand, market share, prices, costs, and possibly also share buybacks.

A low P/E ratio can therefore mean several things. The stock may actually be undervalued. However, the market may also be expecting a significant decline in earnings or have little confidence in the underlying forecast.

The distinction between a cheap company and a favorable earnings year is particularly important. Anyone valuing a cyclical stock with an exceptionally high annual profit can assume high earning power that is not economically repeatable.

The correct follow-up question, therefore, is not why the stock market values ​​a share at three times its earnings. It is, first and foremost, what earnings would be realistic under less favorable conditions.

Small forecast errors change a lot

The mechanics can be illustrated without a specific price forecast. If the actual profit is halved compared to the expected profit, the price-to-earnings ratio (P/E ratio) doubles, assuming the share price remains unchanged. Three becomes six, and 2.6 becomes 5.2.

That alone doesn't necessarily mean it's a bad investment. It becomes problematic when the assessment of its long-term viability simultaneously declines. Then the market may not only expect a lower return, but also accept a lower valuation multiple.

Both effects reinforce each other. If the underlying profit falls by a quarter and the accepted valuation factor simultaneously falls by a fifth, the calculated value is 40 percent lower. This is purely a sensitivity analysis and not a prediction for any of the mentioned stocks.

The opposite effect is also possible. If profits prove more robust than feared, both higher profit expectations and a higher P/E ratio can support the share price.

That's precisely why simply looking at a low figure in isolation isn't enough. The crucial question is whether today's price provides a sufficient buffer against realistic disappointments.

Profit quality determines comparability

The companies do not adjust their results entirely according to the same rules: Nvidia has included stock-based compensation in its adjusted figures since the first quarter of fiscal year 2027, while Broadcom continues to exclude these expenses from certain adjusted results.

This means that two similarly named earnings ratios can have different underlying economic compositions. A P/E ratio comparison is only meaningful if the underlying earnings are comparable.

Stock-based compensation does not necessarily cause an immediate cash outflow. However, it can still generate economic costs for existing shareholders, for example through dilution or share buybacks intended to offset this dilution.

Gains on investments, write-downs on acquisitions, and special tax effects also require a differentiated analysis. Not every adjustment is impermissible, but not every excluded expense is economically insignificant.

A thorough analysis therefore considers several levels simultaneously: reported profit, adjusted earnings, operating cash flow, and free cash flow. If these figures correlate well over a longer period, the reliability of the earnings data increases. Larger deviations are not an automatic cause for alarm, but should be explainable.

Growth can tie up liquidity

Nvidia reported a net profit of $59.688 billion in the second quarter of fiscal year 2027, while operating cash flow was $24.077 billion and free cash flow was $21.341 billion.

During the same period, a significant increase in receivables, among other factors, negatively impacted operating cash flow.

This discrepancy is analytically important, but not automatically a sign of poor business performance. During periods of very strong growth, deliveries can increase faster than incoming payments. In such cases, part of the success initially appears as receivables rather than available cash.

The decisive factor is how things develop. If the receivables are paid according to the contract, the delay can be resolved. However, if payment terms become permanently longer or if capital tied up in debt increases faster than the business, the quality of growth will change.

The same applies to inventory. Stockpiles can be necessary to ensure delivery capability. However, they can also pose a risk if products become technologically obsolete quickly or demand weakens.

A sound assessment therefore does not only ask how much revenue will increase. It asks how much additional capital must be tied up to generate this revenue and how reliably the resulting claims can be converted into cash.

Customers need to earn their investment

The crucial calculation takes place with the buyers of the infrastructure. A chip supplier can report excellent results, while its customers don't yet know whether their investments will yield a sufficient return.

For the boom to be sustainable, profitability on the customer side is therefore crucial. Data centers must justify their expenditures through additional revenue, lower costs, or a strategically valuable benefit.

A distinction should be made between usage and willingness to pay. An application can be used frequently and still generate little revenue if competition forces low prices or if deployment remains expensive.

Productivity gains must also be quantifiable. If an AI system saves working time, an economic advantage only arises if this time can be used effectively and if the costs of monitoring, integration, and errors do not negate the benefits.

For the semiconductor industry, therefore, the number of new applications is not the only important factor. What matters is whether enough applications generate a substantial economic benefit. Only then will investment demand arise, based less on expectations and more on actual returns.

Efficiency can strengthen or weaken demand

More powerful chips and better software can reduce the cost of an AI application. However, this does not automatically mean that fewer or more semiconductors will be needed overall.

If falling costs significantly expand usage, overall demand can increase despite higher efficiency. Companies could automate additional tasks or implement more complex models economically.

If, however, the additional usage remains limited, the same efficiency gain can reduce the need for new hardware. An operator may then require fewer systems to meet a given demand.

This distinction is crucial for investors. Technological progress is generally valuable for users, but it doesn't necessarily translate to the same extent for all suppliers.

The distribution within the infrastructure can also shift. Increased computing power can create new demands on storage or data transmission. Conversely, a modified model architecture can relieve the burden on individual components that were previously in short supply.

The appropriate perspective is therefore neither blanket optimism nor the assumption of an inevitable collapse. What needs to be examined is how efficiency, usage growth, and prices collectively affect the revenue and margins of the respective companies.

Electricity is becoming an economic bottleneck

The International Energy Agency expects global electricity demand for data centers to reach approximately 950 terawatt hours by 2030, or about three percent of global electricity consumption; particularly strong growth is expected for data centers specifically designed for AI.

This is a forecast, and the total value mentioned does not exclusively include AI applications.

Furthermore, what is economically decisive is not so much the global average as local availability. A data center needs electricity at a specific location, with sufficient connection capacity and a reliable supply.

This can lead to delays. An operator may have financing and ordered hardware, but cannot use it productively without a suitable power supply and cooling. For suppliers, such a bottleneck may mean deferred sales rather than lost demand.

At the same time, the demands on capital planning increase. If infrastructure goes into operation later, revenue generation begins later, while some of the costs are already incurred.

Therefore, when evaluating chip companies, it's not just the demand for processors that's relevant. Equally important is how quickly the entire environment can be set up in which these processors are to operate economically.

Buybacks do not automatically create value

Nvidia returned approximately $26 billion to shareholders through share buybacks and dividends during the quarter under review.

Such dividends can increase a stock's attractiveness, but they don't replace sound operational development. A share buyback primarily creates value when the company acquires its own shares below their economic value and doesn't sacrifice more important investments or necessary cash reserves in the process.

A decrease in the number of shares can also increase earnings per share without a corresponding increase in overall profit. Therefore, the analysis should distinguish between operational progress and the purely mathematical effect of a change in the number of shares.

Special caution is advised with cyclical companies. High profits during an upswing can tempt companies to engage in extensive share buybacks. If a downturn follows, financial reserves may be lacking.

A buyback option is not the same as actually executing purchases. It initially creates a degree of flexibility. Whether this flexibility is used and makes economic sense depends on liquidity, investment needs, and the share price.

Buybacks are therefore a capital allocation tool. Their mere existence is not independent proof of undervaluation.

Three developments require different assessments

A meaningful analysis should consider several economically plausible developments, rather than treating a single profit forecast as certain.

In a favorable scenario, the use of artificial intelligence grows rapidly, customers earn sufficient revenue from its applications, and infrastructure expansion proceeds without major delays. In such a situation, substantial investments could remain sustainable for a longer period. However, the crucial factor would be which providers manage to maintain their competitive advantages and margins.

In a moderate development scenario, demand continues to rise, but less rapidly than hoped. Efficiency improvements, increased competition, and more cautious investment behavior limit profit growth. In this environment, a solid company can be a disappointing stock if its share price had previously anticipated significantly better performance.

In an unfavorable scenario, delayed projects, weaker financing, and increasing capacity converge. This could lead to order postponements, price reductions, and significant revisions to profit expectations.

This analysis is not a forecast distribution. It serves to test the robustness of a valuation. An attractive entry point should not only work in the most favorable scenario. The greater the gap between optimistic expectations and conservative return assumptions, the more important the price paid becomes.

Five companies, different stress tests

For Nvidia, the key economic factor is the sustainability of its exceptional profitability. A strong platform can justify high profits. However, valuations must also take into account that customers are reviewing their spending and competitors are challenging attractive margins.

AMD's focus is on profitable scaling. Growth only reaches its full potential when it generates recurring demand, a broader customer base, and an appropriate return on investment.

Broadcom needs to assess the stability of its relationships and programs in the custom semiconductor business. High project volumes can create significant opportunities, but they also increase the importance of individual customer decisions.

At Micron, the valuation depends significantly on what proportion of the earning power remains intact over a storage cycle. Exceptionally high profits should not be automatically considered the norm.

For SanDisk, the crucial factor is whether the development of the NAND business enables a sustainably attractive return on investment. A very low expected P/E ratio is only convincing if the underlying earnings are sufficiently robust.

This results in different investment profiles. The companies cannot be meaningfully reduced to a ranking that only considers share price losses or expected P/E ratios.

When an investment makes economic sense

A compelling purchase price must be commensurate with the uncertainty of the business. The less reliable the long-term profits are, the greater the gap should be between the price paid and a conservatively determined company valuation.

Several questions are crucial here. What profits remain when demand is weaker? How much money must be regularly invested in new products and capacities? How dependent is success on individual customers, political decisions, or a narrow window of technological superiority?

Equally important is the time perspective. A company can be successful in the long term and remain overvalued in the short term. Conversely, a stock under economic pressure can become attractive if its balance sheet is sufficiently stable and the price already reflects very conservative assumptions.

The rationale, therefore, is that neither the largest share price movement nor the lowest projected P/E ratio provides the strongest buying argument. A convincing factor is a combination of a comprehensible competitive position, robust earnings quality, sustainable investment needs, and a price that remains acceptable even in the event of disappointment.

The AI ​​boom doesn't have to end for individual chip stocks to disappoint. It's enough that actual performance falls short of priced-in expectations. That's precisely why examining earnings assumptions is more important than searching for the most spectacular bargain metric.

 

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