Investors are rotating into relatively undervalued chip design and manufacturing companies this week. Micron, Qualcomm, Microchip soared nearly 7%; STMicro rose 5%; TSMC, AMD, ASML gained more than 4% as of Wednesday this week, strongly outperformed Nvidia’s 0.78% weekly gain.
NVDA trades at a forward P/E of 33.45, significantly higher than peers like QCOM (13.52), MU (16.32). NVDA's P/S ratio of 23.65 far exceeds QCOM (4.15), MU (4.07), and AMD (7.20), suggesting profit-taking in high-growth stocks amid concerns about stretched valuations.
Investors are closely monitoring developments in trade policy, viewing any reduction in export barriers as a major catalyst for sustained growth in chip stocks, which remain central to the AI revolution and digital infrastructure expansion.
As investors rotate into undervalued chipmakers, option strategies like bull call spreads offer targeted upside in names like Micron and TSMC. With valuation concerns pressuring Nvidia, tactical positioning in second-tier stocks is gaining traction amid a broad semiconductor rally fueled by AI and trade policy catalysts.
Micron: Investors Are Betting on a Strong Q4 2025 and FY2026
Micron Technology, Inc. shares have been surging in the last couple of months after previously being battered by tariff uncertainty and NAND pricing weakness early in the year. The stars are aligning for the company to achieve record results in late 2025 into early 2026 as the memory cycle really kicks into high gear. Even with the recent gains.
While the macroeconomic factors at play were certainly important to the stock's recovery, another major catalyst was the upcoming memory supercycle. While recent earnings had been hurt by NAND oversupply, the memory market was approaching an inflection point where both DRAM and NAND would be entering favorable pricing environments.
Now, as we approach Micron's Q3 earnings results on June 25, investors might be wondering what to expect.
MU reported lackluster Q2 earnings that demonstrated the depressed margins and providing Q3 guidance that, as expected, forecasted further weakness. But management is expected to provide a rosy outlook into FY2026 that will lead investors to rush back in as the memory upcycle regains steam.
Option Strategy: Bull Call Spread
Structure
Buy July 11, 2025 $115 Call (mid-price: ~$8.38)
Sell July 11, 2025 $120 Call (mid-price: ~$6.13)
Net Debit: ~$2.25 per spread
Key Metrics
Max Profit: $5.00 (difference between strikes) - $2.25 = $2.75 per spread (122% return).
Breakeven: $115 + $2.25 = $117.25.
Why This Works
Limits upfront cost while capping upside.
Benefits from a post-earnings move to $120+.
TSMC’s May Sales Surge 39.6% on Resilient AI Demand
Taiwan Semiconductor Manufacturing Co., the main chipmaker for Nvidia Corp. and Apple Inc., reported a 39.6% jump in May revenue after companies stockpiled chips in response to mounting trade uncertainty. TSMC shares jumped 2.6% on Thursday.
The Hsinchu, Taiwan-based company’s revenue reached NT$320.5 billion ($10.7 billion). That compares with a 48% gain during April. Analysts on average expect a 39% increase in TSMC’s second-quarter sales. While sales in May appeared to be relatively healthy, they dropped 8.3% from April.
TSMC Chief Executive Officer C.C. Wei last week reaffirmed the company’s guidance for sales to grow in the mid-20% range in US dollar terms in 2025. AI chip demand still outstrips supply, he told shareholders.
Option Strategy: Bull Call Spread
Structure:
Buy 215 CALL ($6.71 premium)
Sell 230 CALL ($2.15 premium)
Rationale:
Targets TSMC's proximity to resistance at $212.55 and analyst mean target ($218.45).
Max Profit: $10.35 (if TSMC ≥ $230 at expiry).
Breakeven: $221.36.