r/stocks
Is Micron’s guidance truly bullish for the overall market? I’m not so certain
Micron's memory price hikes may hurt Mag7 margins and sales, casting doubt on the broader market's sustainability.
- Rising memory costs from suppliers like Micron are eating into Mag7's core business margins.
- Mag7 companies like Apple and Microsoft are forced to raise consumer prices, which will hurt sales volume.
- Continued decline in Mag7 due to rising AI input costs could drag down the broader market given their massive weight.
Like everyone, I thought micron’s earnings beat and guidance yesterday was incredible. My initial thought was the report was very bullish for overall tech.
Thinking over the results though, I’m having second thoughts. Mag7 stocks have recently struggled, likely due to concerns over the extent of their ai spend. Micron’s report indicates they’ve substantially increased memory prices and will continue to do so. This will only further fuel mag7 overspending concerns.
And just today, both Apple and Microsoft announced substantial consumer product price increases because of rising memory costs, which will certainly hurt sales volume. The memory costs are now starting to eat into the earnings of mag7’s core businesses. Again, not bullish.
Markets are holding at or near all time highs for the moment despite the mag7 struggles. But if mag7 continues to decline due to rising ai input costs, I’m not so sure the markets can continue to hang on given how large these mag7 companies are.
Disclaimer - I used to work for Micron
Micron is selling shovels in a gold rush, and doing it on binding long term contracts to secure more predictable longer term profits, which are badly needed to manage the risk of the massive expenditures going to expanding production capacity.
Micron is in a strong position relative to its competitors. The big risk here the viability of those contracts.
The money to pay for that HBM does not exist yet. There is this circle of investment and reinvestment among the AI giants that makes their money seem infinite, but they actually spend it extremely rapidly, and constantly need new investment to stay afloat. If OpenAI fails to justify the titanic outflows of cash with meaningful revenues and a clear path to profit, it will fall. News on this front is concerning in my opinion.
There is also a huge ecosystem of BS AI companies that are just bad ideas, being uncritically funded by clueless rich people. Those will fail. When they fail, their demand for AI processing disappears, which will hit outlooks for AI as reality sets in regarding what the actual practical use cases are. Companies are already finding that AI is often more expensive than human labor.
Bankrupt AI companies don't honor purchasing contracts. Hopefully Micron has set aside a very large cash buffer, or else it could become terribly overextended on new fab investments, if contracts that are currently being treated as money turn out to go up in smoke.
Finally, some sober analysis.
To me, it is the ecosystem of also-ran bullshit that will topple the thing. Venture funding is going to "companies" which are wrappers around frontier models that have not proven a goddamn thing about their business other than growing something from $1.00 to $100,000 in revenue is pretty easy. The cracks will appear at both the bottom and the top, the top by relaxation in capex and the bottom by simple bankruptcy.
That is why I hope it all goes up in flames.
14 years is a pretty long commitment for something that’s supposedly going to burst soon
What? Microsoft, Apple, Google, Samsung, HTC, Sony all invested in and explored that space. Hololens? Google Glass? Vision Pro? Galaxy XR? The Vive? PSVR?
I’m having a real hard time even reading whatever that blurb of text is
I bought yesterday's nonsensical dip and fucking ripped 18% today.
I saw an business article from before closing yesterday from some chud getting off on saying that micron's time is over and their stock has been corrected, LMAO
But if you say "we're laying off due to AI" you can avoid saying "we're laying off because we made bad business decisions three years ago". One of these sounds much better.
Organizations will absolutely resort to cloud for deploying internal usage models, since buying onprem servers for local inference is just too costly and requires maintenance. And this is a huge untapped market for hyperscalers - even if openai/anthropic go bankrupt, the demand for AI won't go away, the technology is with us to stay. Most orgs already have their infrastructure in the cloud, including governments, so it won't be a new concept to them. This is where the data center build out will come handy, which is why I'm bullish on hyperscalers long term.
Sysadmin here, this is pretty bang on. Some orgs will try to manage their own hardware, but most won't unless costs gets truly ridiculous. The tech is absolutely not going anywhere
No, He is still counting on wearables
I'm gonna give that a solid maybe.
I certainly don't see Micron becoming small or irrelevant, but the current valuation may be a lot to justify in 10 years when all the competitors have built out their production capacity and we are once again trading chips as commodities
Did they all lose 80b on it and brand the whole company based on it? I dont see that being the same at all.
With AI developing as fast as it is now, it now makes much more sense than it did back when Meta started this.
They announced it in their report. In most of their contracts, prices are agreed to be capped at Q2 2026 prices and floor can be about 20% lower.
You aren't sure about their 80% profit margin, 300% yoy growth, and a forward pe of 10?
Short the stock then