r/stockmarket
Is Micron’s earnings report truly bullish for the overall market? I’m not so certain
Micron's strong earnings and rising memory prices may hurt Mag7 margins and consumer demand, casting doubt on market sustainability.
- Micron reported an earnings beat and strong guidance, showing robust memory demand.
- Rising memory costs are increasing AI capital expenditures for Mag7 companies.
- Higher hardware costs are forcing Mag7 to raise consumer prices, which will hurt sales volume.
- Margin compression in Mag7 core businesses could drag down the broader market given their heavy weighting.
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.
Bullish for Micron, bearish for hyperscalers, hardware companies, any company who buys anything with memory chips in it (so literally everyone). It will be ironic if Micron pricing is the thing that brings down the trade - at some point hyperscalers are going to say "actually you know what, when I set aside $200 billion for data centers I didn't mean for $100 billion of it to be memory chips."
Apple raised the prices on its consumer goods substantially today. Memory pricing is now effecting the consumer directly. I don’t think that is sustainable either.
Well yeah, that's kind of my point. Micron may actually price themself out of customers soon. Demand destruction is a thing, whether its hyperscalers or people buying phones - people will overpay for a hot item but not infinitely.
Reddit discovers price elasticity
msft raising xbox prices too
The is a reason that MU is up but Apple, Microsoft, Nintendo, Google, etc is down today.
The company selling the shovels is making bank while the ones digging are confused why the shovels cost more than the gold they are finding.
You'd think there would be at least one brain in the multi-trillion dollar corporations that would realize a shovel made out of gold doesn't dig very well.
"The future of artificial intelligence will be shaped as much by memory as by computing power." -Jensen Huang
Only a matter of time before Chinese memory makers swoop in with far cheaper prices and plenty of volume to clear the backlog. Not all buyers will go for Chinese memory instead of the Korean/American brands seen as more "premium" or national-security compliant, but enough manufacturers will due to the compelling cost savings that it will very quickly clear the backlog of memory orders, rectify the supply:demand discordance, and tank MU and SK Hynix valuations like a rock. Not a matter of if this happens, but when it happens. Whenever supply and demand disconnect to this extreme someone will eventually step in to capitalize and rectify the discordance. China is the obvious beneficiary here.
This environment will certainly be a boom to Chinese memory. That said, they aren't going to glut the market and undercut the big 3.
We're not talking some cheap commodity like ballpoint pens. Chinese DRAM companies lag by a few nodes, and that makes their profit margins much lower and their chip performance weaker. It will take years to catch up, and that assumes they can secure EUV tooling which they currently have no access to.
The admin would never allow that. MU is one of Trump’s largest positions in his disclosed portfolio.
I think today's sell off was mostly due to inflation report. Market freaks out, then goes back up. Also, before Micron, due to fears about the results being a problem, we saw a sell off Tuesday and Wednesday in tech. Tech opened green but fell back again due to inflation report, I believe, and profit taking from the morning. I think tomorrow will be bullish.
What about the insane inflation in memory? That’s not sustainable.
Hyperscalers are, compared to their own start of year projections, spending more money to purchase less stuff. Soon consumers will spend more money to purchase less stuff.
"Memory is in need" is only bullish for memory producers. For everyone else this should be a negative update
Try not to buy it at the highest