The Six Five team discusses Micron Q4FY24 Earnings
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Transcript:
Patrick Moorhead: Micron, big-time provider of memory and storage, stock popped based on what they’re doing in AI accelerators and GPU memory. But also, as we’ve seen with this accordion memory market, they have pricing power back in the industry. Dan, how’d they do? Any surprises here?
Daniel Newman: I mean, I think people were positive to the upside coming out, because we’re kind of at the tail or the beginning of the next wave, however you want to look at it, but this is really the tail end. Micron, one of the sort of leading indicators of AI demand. And remember, it’s been kind of a bit like to your point, of an accordion where the stock went way up to about 150 and then it dropped almost 50% when others… And so the memory space is a very boom-bust space, and despite the fact that HBM3 has a ton of demand right now, we’ve heard it’s sold out through ’25. We’re hearing they’re trying to add capacity. We of course, alongside CoWos, different TSMC processes, there’s so little capacity to make more, but it’s going to be used up all the way to the brim.
I actually watched the interview on Squawk on the Street with the CEO Sanjay Mehrotra, and it was interesting to hear his sort of takeaway on it. I mean, the company did well in this quarter. They pushed guidance forward up in the next quarter. It’s not like some staggering amount, but they basically, I think they beat very narrowly this quarter but they did say that they believe that the growth of this space is substantial and it’s not a long horizon. Meaning, this isn’t like… One of the questions they asked Sanjay was, well, is it a year? Is it two? Is this going to max out? And he was pretty adamant that that’s not the case, that this is a several year tailwind for the company.
Beyond the HBM thing though, Pat, he was also, we just got done talking AI PC. Well, Micron has a strong affiliation with this demand cycle. So I do believe there’s an increased demand cycle, I call it an elongated cycle. We’ve talked about a super cycle, but I think we believe there’s an elongated cycle that’s going to be created for new devices that have these NPUs and these AI capabilities. Micron provides content for the phones, they provide content for the PCs. They’ve got some exposure to connected devices, IOT, smart glasses. Pat, we’re not going to talk about Meta on the show, but we know that Meta had a pretty interesting week and announced something very cool with a new unused name for innovative technology called Orion. Nobody’s used that name before for anything. And then they also have exposure in vehicle and automotive.
So they’re diversified into AI and the scale of this AI demand wave, but I’m pretty certain that most of the enthusiasm coming out the gate here is HBM3 driven. Its, this is basically the first indicator going into the next cycle of earnings, which is going to start in just two weeks, Pat, with IBM and Intel and others coming down the barrel, that AI is still hot. That the sort of bearish sentiment that comes from the corners of Fintwit and the Perma-bears on Wall Street that are saying AI is a fad and it’s going to… Pat, you and I when we go on and talk about the conversations we had at GSA next, I think we can be pretty confident having talked to foundry, talking to packaging, talking to material companies, talking to design. There’s no bearishness in the semiconductor space about AI. And so Micron is a beneficiary.
But again, this is a company that went to 150, went back under 100, and now it got a 17 or so percent pop on the news, but it’s still nowhere near its highs right now. So I think it’s still an interesting play, and the company’s got some leading technology here in the US. They are an actual manufacturer of Foundry, a Chip Slack beneficiary, and they seem to be coming out of what had been a very, very tough period of time into a number of tailwinds that should actually prop the company’s long-term up because, Pat also, these one-year cycles. These one-year cycles on data center open up the door.
Patrick Moorhead: Great stuff. I mean, I have nothing good to add other than, Micron reflects the market. And where it’s hot in AI and that’s data center, when it comes to smartphones and PCs because they pulled out on CapEx like everybody else did, they have more pricing power than they had before. But we haven’t seen a boost in PCs, we haven’t seen a boost in smartphones market, hence they haven’t seen a meaningful volume increase, but they have seen price increases and price increases are good.
