The big question humming through the tech investing world this month is whether semiconductor companies -- which are down about 25% this year but have rallied recently -- are finally cheap. The answer from this corner of that world is that while a few chipmakers are close to troughs in valuation, as a whole the group is still richly priced. The main reason is that 2005 earnings estimates on most of the companies are probably too high, making them only seem inexpensive on a forward price/earnings basis. Giving solace to bulls has been the oddly positive trading reaction to recent lousy earnings guidance from leading chipmakers National Semiconductor ( NSM) and Broadcom ( BRCM). The Philadelphia Semiconductor Index (SOX) is up 10% in the past week on a bout of short-covering and wishful thinking. When stocks go up on bad news, traders tend to think they're sold out. Tech investors have been burned by a couple of powerful up moves in the chip group this summer, though, and the fate of this move is likely to be similar, but with an evil twist: It should last longer but end the same. For some data on this, I'll look at a report published Monday by Merrill Lynch analyst Joseph Osha and offer my own calculations. Osha argues that investors today should focus on buying semiconductor companies at trough valuations because industry revenue is set to contract sharply in the next 18 months. He estimates sales will grow by just 6% in 2005, following a 31% advance in 2004. Profit margins for most of the major companies are near historic peaks already, he says, and unlikely to expand. And yet very few semis are at anything near trough valuations either on a historical or forward-looking basis. That's why a short-term trading rally of two to six weeks, sparked by optimism for the seasonally strong fourth quarter, will probably run into a wall of reality as companies announce better times are just not in the cards.