The sad reality of specialty chip stocks is that today's star is almost always tomorrow's has-been, and investors lulled by a fast-rising stock almost always wind up getting blindsided. Just take a look at the likes of

C-Cube

(CUBE) - Get Report

and

S3

(SIII)

to see what can go wrong, or

Tseng Labs

and

ESS Technology

(ESST)

to see how very bad the story can get. Now a vocal chorus of short-sellers, and even a few analysts, think the same fate awaits

Genesis Microchip

(GNSS)

.

The Canadian company's stock came alive late last year because it was

the

pure play among the makers of chips for LCD flat panel PC monitors, whose sales started to sizzle last summer when the price of LCD displays started to fall. At one point they fell by as much as 50%, breaking the magic $1,000 market, making them a real competitor to regular PC monitors.

Genesis was a clear winner, having grabbed more than half the market for chips that perform what is known as scaling, which scales the image up in size. There's little debate that Genesis makes a fine product. "They're headed in the right direction," says analyst J.D. Abouchar at

Preferred Capital

in San Francisco. "But so is their competition."

And therein lies the possible problem -- especially at a company that boasts a market value of $300 million on sales that are annualizing at a mere $46 million. (That's 12 times earnings. Compare that with

NeoMagic

(NMGC)

, which has more than $200 million in revenues and trades at a scant 1 times sales.)

What tripped Tseng? What tripped ESS? What tripped C-Cube? What tripped S3? The same thing that skeptics think will trip Genesis: Competition and cut-throat pricing.

The first hint of trouble came last week, when Genesis

just

made its fourth quarter. When you're trading at 59 times forward earnings, you're supposed to blow past the estimates. What's more, Abouchar and his colleague, Brian Alger, who have written a negative research report on Genesis, believe the company's forecasts are too optimistic based on industry estimates. They also believe that Genesis provides an analog solution in a world that is turning digital, using a standard created by privately held

Silicon Image

.

Genesis CEO Paul Russo says he's not worried about the transition to digital because Genesis is in the process of acquiring

Paradise Electronics

, a leading supplier of chips for digital displays. And as for prices, he says the industry is currently "supply constrained," and that as more functions get integrated into one or two chips, prices may actually rise. He adds that he's aware of the history of specialty chip companies, but believes his company will prove the exception because it's got cash, a strong team of execs and it's currently the leader.

Maybe you could've said the same things about the others.

Short Positions

Aiming at Amazon (Again!):

Anybody foolish enough to bet (or write -- wink, wink, nod, nod) against

Amazon.com

(AMZN) - Get Report

over the past year has had their pocketbook (er, ego) handed to them. So, here comes

Michael Murphy

of the

California Technology Stock Letter

, who says that he believes Amazon has a good shot at having a down sequential quarter on sales. Murphy says he does not currently have a position in the stock.

By his reckoning, post-Christmas "seasonality in book sales is stronger than people think." This is something the company has avoided in the past because of its strong growth, he says, "but they're so much bigger now that they will be hit for it." What's more, the company's competitors, such as

Buy.com

, are getting much stronger and Amazon won't get the incremental nudge from its Christmas gift store. "Put that together and they will have a down quarter in revenues," he says. If he's wrong, he figures it'll be because Amazon has sold CDs "at no profit."

If he's right, he figures the change will be some kind "inflection point" that could deliver a blow to the stocks of other Internet retailers.

Amazon isn't commenting on first-quarter results. However, in connection with last quarter's earnings, on Jan. 26, the company said it anticipated "some sequential growth," but added that it was "too early to say whether this will be anything more than very slight."

Meanwhile, Merrill Lynch analyst and Amazon cheerleader

Henry Blodget

, who is expecting higher sales, told me yesterday he's not worried about a disappointment. "Just take a look back a year ago," he says. "They were up 30% sequentially in the first quarter and they didn't have any other business." He doesn't expect seasonality to be an issue for another 5 years.

Another one bites the dust:

Back in December, this column raised

questions that

Pillowtex

(PTX) - Get Report

, a textile maker, would start running into rough earnings waters as cotton subsidies ended. At the time the stock was in the low 30s. Yesterday it slipped 4 7/8, or 28% to 12 5/8, after the company disclosed that earnings for the first half of the year would be below analyst expectations.

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

herb@thestreet.com. Greenberg writes a monthly column for Fortune and provides daily commentary for CNBC.