Meet Kevin 对 $MU 的判断变化

But uh you know now the question is are we getting visibility potentially into price decreases the second derivative turning negative and if the second derivative turns negative on price and growth and they're not buying back as much as expected what does that mean for a company like Micron who's obviously expecting a significant uh uh buyback market a lot of people are expecting big buybacks here mostly because the executives are like oh yeah we're going to return so much capital shareholders Yeah, that's great. Cool. That sounds wonderful. But then you get UBS that comes out and UBS is like, "Oh yeah, you know, we're actually we're going to return like I don't know how about how does uh eight uh you know, 40% of the company we're going to buy back potentially 40% of the company sound." That's great. That helps. Thanks, UBS. But does that actually end up uh driving reality if Micron comes out and says, "Oh yeah, we're going to do a buyback and it's only 10%." Right? Oh, that's disappointing.

The thing to really watch today is what's going to happen at open with companies like SanDisk, SKH Highix, and uh Micron.

So, SanDisk, we can see it here. It's pulling the Samsung at least first minute.

I know the buyback was less than expected, but what we should do is we should to to lead into that, we should pull up the uh Micron UBS 40% buyback expectation because it was a UBS call.

Uh, a UBS analyst forecast the company could generate as much as $400 billion in free cash flow through the end of 2028. That amount of money, especially for a business like Micron, has had its fair share of downturns in the past. It's staggering. The analyst believes the company could retire as much as 40% of its outstanding shares uh with that money.

UBS. This looks like uh this must be an op-ed. But anyway, where is the UBS piece? UBS here. Uh, a UBS analyst forecast the company could generate as much as $400 billion in free cash flow through the end of 2028. That amount of money, especially for a business like Micron, has had its fair share of downturns in the past. It's staggering. The analyst believes the company could retire as much as 40% of its outstanding shares uh with that money.

Okay. So, I'm actually curious what else they're saying, but but historically, you know, the companies want to hedge for a future downfall um or a slowdown in pricing. And so, whether they keep more money for plant property and equipment and and the expansion that they're doing in the actual buildout uh or they just save money for rainy day after retiring debt, you know, that tends to take more capital than people like.

Usually, when you have earnings at a company that explode like this, okay, these are the percentage growth levels of of earnings per share growth at Micron, earnings per share exploded like 900%. Uh, you know, 25 to 26, like this is an insane growth in earnings per share.

Even though Micron's revenue is expected to go up for the next four years, they're going to make more money on top of more money on top of more money. Their growth rate converges to zero. And that is a problem.

Well, does it peak closer to where we are now? Uh does it, you know, peak after the anthropic IPO?

You know, this is crystal ball kind of stuff. But the point is the markets care about expectations. The market is already expecting pricing to come down from memory. That doesn't mean it's bad for Micron stock, right? The markets already know memory prices are going to come down in the future.

We know the growth rate, the second derivative, the growth rate of memory prices is turning negative. The question is not that it's going to come down. The question is how long is the cycle going to last? That's what Namora is saying as well. They're like, look, right now we're in massive shortage.

This time is not different. The cycle will end. The problem is when we have the boom, the usual boom cycle looks like this. Can this cycle instead of looking like this look like this where you plateau longer?

Okay, that right here, this fat so to speak, that is your reason to be bullish that the cycle can last longer.

If these expectations get compressed because Anthropic stops spending as much money for example because remember high bandwidth memory this is kind of important small sidebar most enterprise artificial intelligence in my opinion and what we're seeing with like what we're doing with our artificial intelligence at reinvest most artificial intelligence for inference does not need as much memory as the frontier levels of training.

This is in my opinion logical. The frontier models and training the frontier models, they need those Blackwell GB, you know, 200, 300s, the Vera Rubin stack.

They need the latest and greatest massive memory stack to keep those frontier models going. Openweight models and enterprise applications, they don't need that much.

They can operate on substantially smaller chips, older chips, in-house chips, openweight models that are more compressed. The more we use those, the more we compress the need for high bandwidth memory.

It's still going to go up in price. It's still in shortage, but the more these open weight models come, the more you you reduce that plateau. And that's how the market trades for memory stocks.

The market doesn't trade on, oh, memory prices are going to go down in the future. Yeah. No. Every jerk off in their mom knows memory prices are going to come down again in the future. We know the second derivative is going negative.

The whole cycle is dependent on what keeps this getting fatter. If robotics come out and all of a sudden we need to train, which eventually we will, all of these vision-based systems on uh you know for what's it called? um GPU vision um sorry how robotic vision that's where I'm going with all of the robotic vision that needs to be trained is going to use a lot of hardware a lot of GPU a lot of high bandwidth memory but if that's 15 years away we could have a big down cycle before that if that's a year away and the Optimus robot is coming hey we could scurve this up again that's how memory stocks trade and that's what makes it hard to to be exposed in debt to memory stocks because if you're margined up on memory stocks, you are setting yourself up for oopsy dupsies.

Uh just like situational awareness did, you know, they were they were a a real lesson here. So, let me go to some of the other pages I have right here. Okay. Yeah. Yeah. Yeah. So, technically, we are right here with pricing.

So you can actually see that the midpoint expected range here of export prices to a CSI shock is that we still have time where memory prices go up, the second derivative is going down because the line is flattening and then soon the first derivative will go down, right? The first derivative goes negative.

Uh memory pricing starts coming down usually, you know, 2 to 3 years after the cycle starts. the cycle really started in about Q4 2025 and by 2029 you're just outright negative.

That's already built in. That's what memory stocks price off of right now and that makes them hard to to invest in with debt. Uh so just be very careful because the volatility will be massive because you're trading expectations.

Let's go see if we could find the price increases. They're listed somewhere here in in the Micron statement. and I'll pull them up, but just from memory, we went from like, oh yeah, prices went up 110% year-over-year

Sales of DRAMM increased 343% primarily due to low 260% increases in selling prices and mid 310% increases in average selling prices for NAND. So not exactly 400% but my my point is Q2 this is the micron Q2 piece Q2 was even more extreme than Q1 like substantially more extreme. These numbers if you pull up the Q1 were at like mid 110 range is what they wrote for this.

So most of that price increase that they're talking about in the no more research piece uh aligned with the second quarter not the first quarter which is again important because it helps you pinpoint why claude.

Otherwise the companies will end up leaning conservative. It's like well let's not have bad optics at buying our stock back too high. Uh we'll do some dividends instead. uh we'll keep a little bit more capital for debt payoff which is smart or uh you know capex.

Uh yeah, I mean this is a hardware index. So I've got uh Nvidia, TSM, Broadcom, Micron. Oh, Micron's a big allocation now. What's the allocation in it?

So unfortunately when you're when you're in Sockil you're 3x exposed to a 7.7% position in Micron. Uh, and they are a persistent source of deflation. However, because of the way high bandwidth memory is manufactured that it takes so much of this DRAM that you stack together, uh you're creating a structural shortage that's just going to last longer than previous cycles.

In the first half, year-over-year, memory prices increased 135%. And if you just look at the second quarter postcloud, memory prices were up about 400%.

Now, I think that's actually a really important note to make is that the highest gain in memory prices actually came immediately after and sort of during the anthropic claude um moment, if you will. That's important because it reiterates this concern of what is the catalyst that keeps it pumping.

Bottom line for memory, you're getting me in a shortage for a while. Uh but at some point we need expectations to keep pumping the cycle to actually enable those like 40% micron buybacks to happen.

The issue is all these companies are building out uh machinery and capacity based on their expectations of future demand not anal or in my opinion not realizing how every single memory related company is trying to throw money into expanding capacity to capture that demand that we have today. And that's usually how you end up getting into an over supply because it's not like they coordinate all of their buildouts.

If you're really bullish on memory, in my opinion, it should be because you expect that fat portion of the curve that that plateauing to either last longer or you see S-curves that that maybe I don't.

again robotics, healthcare, AGI, I think these are a little further out than markets expect today and and that creates some downside risk for these plays.

That's why Nvidia is able to pay TSMC and Micron and SKH Heinix and all the way down.