MS Portfolio Update | June 2026
The good old days
In the series finale of The Office, Andy Bernard hits us with this devastating quote: “I wish there was a way to know you're in the good old days before you've actually left them.”
With how the markets are right now, we are right in the middle of the good old days. In case you missed the everything bubble of 2021, this is right about how it felt back then.
Every thesis was proven in days, and random companies were doubling up every week. Hell, we were even trading pictures of rocks at the same value as that of an actual waterfront property in Florida.
While we are not that crazy yet (as the price rise is somewhat supported by earnings improvement), when we did our last portfolio update a month back, the MS portfolio was up 33% YTD.
Today, we are at ~78%!
The problem is that even though demand is real, there's a lot of crowding into semiconductor stocks. "Long Semis" is now the most crowded trade, and investors are already discounting multiple years of strong growth.
As Rebound Capital highlighted, there is literally panic buying in semiconductor stocks.
AMD is up roughly 330% over the trailing 12 months and now trades at 50x forward earnings, compared with Nvidia at 24x. The semicap names have rerated even harder: ASML at roughly 52x trailing earnings versus 38x at the end of 2024, Lam Research at 60x against a ten-year average of 20x, and Applied Materials at 42x against a ten-year average of 18x. These are cyclical equipment vendors being valued as if the cycle no longer exists.
The memory and optics complex is where the melt-up is cleanest. SK Hynix is up about 248% year to date and Micron 226%, with both joining Samsung in the trillion-dollar club. In optics, Applied Optoelectronics is up roughly 335% YTD, Lumentum 120%, and Coherent close to 80%. Some of the other Tier 2/3 suppliers are up similarly.
With the bad news out of the way, here’s what’s happening with the fundamentals:
Demand for semiconductors is nothing like what we’ve seen before. Until now, investors expected that we were at peak demand, with hyperscalers reinvesting almost all of their cash flow into AI data centers. With Google raising $80B from stock sales to fund its AI buildout, there is now theoretically no upper limit on the money that can be pumped into the ecosystem.
Still, even with the parabolic increase in revenue and profits, we're slightly jittery as the stock price tends to drop well before the slowdown data comes through in earnings reports. Based on the previous cycles, by the time the estimate cuts arrived, IT stocks had already fallen an average of nearly 30% — and individual names like Intel, Nvidia, and Micron fell considerably more.
With this level of crowding and hype, any hiccup, however temporary, will lead to a sharp sell-off. The optimal strategy here would be to take a step back, dig into names and sectors outside the current hype cycle, and invest at more palatable valuations.