Micron's New Wall Street Bull

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00:00I think, you know, the question of a lot of these circular deals that you're referencing,

00:05importantly, don't really kick in until the second half of 2026, right? So we have a situation where

00:12there's very strong expectations for AI for the next 12 months. And then there's a bunch of stuff

00:19happening that would cause it to inflect to a more positive growth rate in 12 months. I'm not

00:24necessarily endorsing every aspect of that, but it is all upside to what's in street models. And so

00:29I think it is very strong conditions. And I think the strength that we're seeing right now in

00:34commodities, which is not just AI, there's a, I would sort of argue that the legacy parts of the

00:39business are actually where we're seeing more strength. But it's a way of kind of playing some

00:44of this strength in compute without kind of making a bet on custom silicon versus India versus AMD. It's

00:51a beneficiary of the broader base trends. And the stocks moved up a lot. It was a late call from us.

00:56We've said that. But the conditions that we're seeing are really positive and have the potential

01:03to drive significant upward revision to earnings. And the stock's pretty inexpensive on those near

01:07term earnings. So it's a stock that we like quite a bit here in the near term, even though we missed

01:11the early stages of the move.

01:13The, you know, we've been talking a lot about a bubble and I don't think it's fair to, certainly

01:17not for me to characterize this as a bubble, but a conclusion hasn't been drawn obviously yet.

01:22And they normally aren't until it's burst. But Minsky has said there are stages, I think, displacement,

01:30then boom, euphoria, profit taking, and then panic. That's the end, obviously. If we're in a bubble,

01:37Joseph, where do you think we are?

01:40Well, look, I think we've seen cloud growing a lot for 20 years and we've seen about five windows of digestion.

01:47So it's certainly possible that the truth is in the middle, that we're looking at a very strong

01:52investment cycle and that there will be periods of consolidation where, you know, we've moved ahead.

01:58I think there's very strong visibility for the next 12 months for everything in AI.

02:03I think the near term dynamic that I think is sort of exciting for the microns of the world is that

02:09we've spent a lot of time and energy bringing these AI servers up and running.

02:13And now we're finding that a lot of the hardware that sits alongside of those servers

02:17is actually where the supply chain pain points are. So traditional servers, CPUs, storage,

02:23you know, those are the areas that are causing the most angst.

02:25But I think there's a very strong 12-month window ahead of us.

02:28And then you shift to these new agreements that are being signed,

02:32and those are all starting second half 26 with NVIDIA's Rubin or AMD's MI450

02:37or Broadcom's ASIC platforms. All of those businesses start in the second half of 2026.

02:45And we've actually got the market kind of going through a little bit of a plateau at that phase.

02:50So all of the stuff that we're worried about, is this excessive? Is the circular financing

02:54creating, you know, too much expectation? Those are all very reasonable questions.

02:59But that's upside to the trajectory that we're on, I think. And so, you know, and I think right now,

03:05a lot of the investing in 2025 for AI is actually managing the high token growth and the query volume,

03:11right? So it's the inference part of the business. It's the actual usage of these models that's driving

03:16a lot of the investment. So I certainly would take your point. I think there are periods of

03:21consolidation that will come. And I think if you were to take every positive thing that's being

03:27talked about and put it in your five-year model, you know, you could sort of say that there's

03:30signs of excess inflation there. But that's not really what people are banking on over the next

03:37couple of years. So still a very positive outlook for me. Well, I mean, is production capacity a

03:43constraint for a company like Micron? I mean, for any of these chip makers, is it the case that they

03:49just can't make as many as they could sell for years to come? Yeah, I think so. My spreadsheet

03:58answer to that, the reason that we've been too cautious for the last couple of months is that,

04:05look, there's a lot of capital going into the DRAM space. There's a lot of investment happening

04:10that should generate supply growth. You look at where we are with the PC market, with the smartphone

04:16market. You would sort of say, okay, we don't have an oversupplied market, but we don't have

04:20a shortage environment either. I think the reality that's playing out right now is that we are

04:27experiencing significant shortages. And it feels to me like pretty early stage, people are not able to

04:34get everything that they need, not able to deploy everything that they need, because there's just not

04:37enough DRAM. And this is not really an AI comment. It's much more on, you know, traditional DDR5 for

04:43servers and things like that. But we're seeing levels of anxiety from the supply chain that are

04:48worried about all of 2026. Are we going to be able to get everything that we need? And it's very

04:53reminiscent to me of 2018, where the cloud guys kind of first emerged on the scene, and there was all

04:59this incremental demand for DRAM, and we saw these shortages. So I'm kind of reporting on strength that

05:05we're hearing rather than kind of analyzing and coming up with that. But it feels very durable. It feels

05:11like the people who are purchasing managers believe that this is going to be strong through all of

05:152026. And they're behaving accordingly, people are going to be willing to build inventory,

05:19because they believe that prices are going to keep rising. So it seems like it's good, at least for

05:24for 2026. Longer term, you know, to me, I would say the longer term through cycle metrics,

05:31micron looks expensive. So the stock is interesting insofar as I see very strong near term dynamics,

05:37not really making the case that it's, you know, years to come. But again, these more bullish cases

05:42for what AI looks like, well, then yeah, then we're sold out for many, many years. But does

05:45does Micron have an edge on its competition? I mean, I started covering this company 25 years ago.

05:54And back then, people were saying DRAM is a commodity is high bandwidth DRAM somehow special.

06:00It's a little bit special. But it's still I treat this as a commodity company, for sure.

06:06But a commodity company in a consolidating space that has had very good, you know, dynamics,

06:11still cyclical. And it's important to have that cyclicality in mind. High bandwidth memory is very

06:17difficult to do. Micron is not the leader Hynix is. But, you know, Micron is is in kind of low 20s

06:24percent market share. Right. And we think they have very good product quality. They have performance

06:28per watt advantages versus the competition. So it's not I would say that they have a huge edge.

06:34But I would say that it is a market that feels like it has durable structural margin profile.

06:39That's a little less commodity like. And it's helping the non the more commodity part of the

06:44market because it's siphoning away supply.

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