NEW YORK ( TheStreet) -- It is broadly understood that chip stocks have become one of the best derivative plays on the market -- and for good reason. The growing popularity of smartphones and mobile devices from Apple (AAPL) and Google (GOOG) have made household names out of once-obscure players such as TriQuint (TQNT) and Cirrus Logic (CRUS) while also sending dominant names such as
Qualcomm(QCOM) to new heights. The surprise performance of these chips shows how strong Apple's famed "halo effect" really is.
One name that has become very prominent is ARM Holdings (ARMH). Unlike rivals that also get rewarded from exposure to Apple devices, ARM has decided to play the role of the "sneaky diplomat" by also licensing its chip technology to the highly anticipated launch of Microsoft's (MSFT - Get Report) Windows 8.
But the question is, for a stock that is already grossly expensive, how much more upside is there for ARM, regardless of how successful Microsoft's launch might be? Or more appropriately, can a "Windows effect" produce more than an ARM's-length of growth -- at least to the extent it can justify a higher stock price?As impressed as I am with ARM's business model and the fact that it is able to forge deals with competing companies, its stock price suggests it is priced for perfection and for me this has always been a great source for concern, much less thinking Windows 8 can wring out some untapped value.