Chip Stocks Haven’t Done This Since 2008

BWB - Business With Brian•Oct 25, 2026

Summary

Brian explains that the AI build-out is operating on two different timelines: the immediate expansion of massive data centers and the long-term rise of edge computing. Brian characterizes data centers as the 'brain' where learning occurs, while edge devices like smartphones and autonomous vehicles act as the 'reflexes' that require local processing for speed. Brian believes the recent $2 trillion sell-off in AI stocks was driven by debt concerns that do not align with the continued high spending from major players like Meta, Amazon, and Google.

NVIDIA (NVDA): Brian labels this stock as "severely undervalued," placing it in the deepest undervalued tier of Brian's investment system. Brian notes that Nvidia trades at approximately 23 times next year's earnings, which Brian considers a low price for a company growing this rapidly. Brian emphasizes that Nvidia's data center business is currently growing four times faster than its edge business, making it a primary beneficiary of the current infrastructure build-out.

Broadcom (AVGO): Brian categorizes Broadcom as "slightly undervalued," acknowledging its critical role in designing custom AI chips for major clients like Google and Meta. Brian expresses some caution regarding Broadcom's $71 billion financing commitment to a single customer, likely Anthropic, which creates some uncertainty. Brian points out that while the business is strong, Brian's system pulls back the valuation due to these financing risks.

Amazon (AMZN): Brian identifies Amazon as "slightly undervalued" and views it as a major "toll collector" in the AI space. Brian highlights that AWS has nearly $500 billion in signed contracts and that Amazon successfully uses AI services like Alexa to increase Prime subscription rates. Brian is closely watching the upcoming earnings report to see if Amazon's growth trajectory justifies a larger position.

Tesla (TSLA): Brian views Tesla as "fairly valued" but remains highly skeptical of the aggressive production timelines provided by Elon Musk for robots and robo-taxis. Brian notes that institutional investors have been selling Tesla for three consecutive quarters, though Brian admits the Full Self-Driving (FSD) subscription revenue is a strong component of Tesla's edge computing strategy. Brian prefers to wait for more realistic growth data before becoming more bullish on Tesla's robotics future.

Micron (MU): Brian observes that Micron's stock sells for about five times next year's earnings, but Brian currently keeps it off Brian's valuation ladder due to its historical cyclicality. Brian suggests that if the current AI demand persists, the traditional boom-and-bust cycle might be replaced by a much longer 10-year cycle. Brian highlights that Micron's margins on edge memory for phones and PCs are actually higher than its margins for cloud-based AI memory.

Mentioned Stocks

AVGO

Sentiment: BUYAction: RECOMMENDED

Reasoning: Brian labels Broadcom as 'slightly undervalued.' While Brian's system notes uncertainty regarding $71 billion in financing for a customer (likely Anthropic), Brian believes Broadcom's position in custom AI chips for Google and Meta remains strong.

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Sentiment: HOLD

Reasoning: Brian keeps Micron off Brian's valuation ladder due to extreme historical volatility in earnings. Brian notes that while memory may be entering a 10-year cycle instead of a traditional cyclical one, Brian currently lacks a valuation Brian trusts.

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AMZN

Sentiment: BUYAction: RECOMMENDED

Reasoning: Brian finds Amazon 'slightly undervalued' ahead of its earnings report. Brian views Amazon as a key winner due to its massive AWS backlog of nearly $500 billion and its ability to monetize AI through Prime subscriptions.

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NVDA

Sentiment: BUYAction: RECOMMENDED

Reasoning: Brian states that Nvidia is 'severely undervalued' on Brian's valuation ladder. Brian notes that the stock trades at 23 times next year's earnings, which Brian considers cheap for its growth rate. Brian argues the recent sell-off created a phenomenal buying opportunity.

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QCOM

Sentiment: HOLD

Reasoning: Brian views Qualcomm as 'slightly overvalued.' Brian notes that while Qualcomm pushes edge computing heavily, phone makers are building fewer devices due to expensive memory costs.

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ARM

Sentiment: HOLD

Reasoning: Brian states that ARM flips between 'slightly overvalued' and 'fairly valued.' Brian points out that investors are paying 100 times next year's earnings, which Brian suggests means the market has already priced in the potential of edge computing.

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TSLA

Sentiment: HOLD

Reasoning: Brian considers Tesla 'fairly valued' but is skeptical of Elon Musk's timelines for robotics and robo-taxis. Brian notes that 'whales' have been exiting the stock for three quarters, though Brian likes the recurring revenue from FSD subscriptions.

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