Micron Technology
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Earnings tonight-and they will be spectacular. However the reaction is a function of Options strategy
Micron is a textbook example of how options flow and dealer hedging can dominate short-term price action.
Before earnings, traders aggressively buy call options to bet on upside. Dealers who sell those calls hedge by buying stock (delta hedging), which creates real upward pressure (observed!). As the stock rises, the options’ delta increases, forcing dealers to buy even more shares (gamma effect). This feedback loop is why MU often rallies sharply into earnings.
By the time earnings arrive, positioning is crowded and dealers are heavily long stock as a hedge. The key shift happens after the event: implied volatility collapses, call options lose value, and traders either close positions or let them decay.
Dealers no longer need their hedge.
So they start selling the stock they previously bought.
That creates mechanical selling pressure — regardless of how good the earnings actually are. This is why MU can drop even after strong results: the “hedging bid” disappears.
In short, MU’s volatility isn’t just fundamentals — it’s driven by options positioning. Heavy call buying pushes it up pre-earnings, and the unwind of those hedges often pulls it down after.All I care about is the result and the guide (not whether the stock gains or loses 10%)-we will see if they get anywhere close to $11-$12 EPS on $23B and guide $27B and $15. Whatever the guide is it will be low-balled.
NB-the stock entered 2026 at $285 and in PM today it is $475! It was also below $400 only 6 days ago-no one knows what the reaction will be and it is irrelevant because the environment and Microns elite position within it can only mean continued record results as far as they have visibility. It would be nice if management mention contracts locking in 2027 supply-possible.
Imo the company will earn close to $100 over the next 12 months starting next Q and given we paid just under $90 13 months ago it just goes to show you how the market can misprice some assets. I think the actual results for the next year will look something like this:
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What we want to see tonight is EPS > $10.50. Too hard to say what they will report beyond that. Potential for over $11.
Revenue > $22B
Guide-id be happy with anything +4B over the Q2 actual and an EPS +$3.50 over the Q2 actual. say circa $26B/$14...Their Guide was $18.7B and $8.40 EPS so the above would be a colossal beat.
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Results are in. 24b and $12 eps. The guide is $33.5b and $19. No other way to describe it but.
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All you have to know really-from prepared remarks .For context, this isn't a 'we are sold out for 2026'. The SCA is a 5 year supply contract. Micron won't say but it points to Nvidia with 'many other SCAs are in progress'. I would speculate that pretty soon it's al going to be sold out for years.
The language used is intentional. One can interpret 'foreseeable future' however they choose depending on bias. My interpretation is 'years'. The fact remains all planned greeenfield sites globally, across all manufacturers will see bit growth in the 25-30% range whilst demand is 100% greater at least on the same annual basis. And this does not take into account level 3 and level 4 autonomous vehicles nor robotics which are coming and will need significant memory (edge devices).
Broadly speaking-if we are in a constrained environment we can expect ASP to continue to move up in the 50% range annually and coupled with bit growth of 20-25% and better yield (lower cost), the result is 70-80% revenue growth, margin growth and operating leverage continuing for the foreseeable future.
Of course if you don't believe spending on data centres will continue, we've peaked.
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686% growth in net income
195% increase in RevenueFwd PE is around 4!
I agree that Data centre(racks) may not be the biggest long term driver. Edge cases are likely to be larger opportunities
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Hi Al,
The same market priced the stock at $90 a year ago so it's really all you need to know about how efficient it is at times. The current situation is, and not too dissimilar to nvidia, they think it's peaked and the party is over. I think they are wrong and not slightly wrong either. The SCA 'with a very large customer' is an industry first and changes the landscape by giving certainty to Micron that a customer is contractually locked-in to buy large quantities for 'years'(5 in this case). That is not a trivial development. And let's face it, others will now get worried and also lock in long term deals or face exclusion.Remember two weeks ago when Jensen said 'we have secured our supply chain'
I am highly confident we won't stay at these levels for long. Analysts will certainly update their models this week as well.
The deal would look something like this:
Core Deal Structure
Size & Term: ~$100 -$130 billion over 5 years, covering HBM4e, HBM3e, and potential HBM5 supply for NVIDIA’s Vera Rubin AI and future GPU platforms.
Payment & Guarantees: NVIDIA commits to minimum annual purchase volumes (~$25 billion/year). Payments include base contract pricing plus potential escalators tied to wafer costs or memory market spot-rate increases. Shortfalls in volume may trigger penalties or make-good clauses to protect Micron.
Benefits:
For NVIDIA: Secures long-term HBM supply at hyperscale, ensures priority access, and hedges against extreme spot-market volatility.
For Micron: Guarantees $130 billion revenue over five years, improves production planning, and shares some market risk with a major customer.
Flexibility & Technology Alignment: Volumes and HBM generations may adjust over the contract to match AI demand growth, with co-optimisation of HBM designs for NVIDIA GPUs. -
Hi Al,
The same market priced the stock at $90 a year ago so it's really all you need to know about how efficient it is at times. The current situation is, and not too dissimilar to nvidia, they think it's peaked and the party is over. I think they are wrong and not slightly wrong either. The SCA 'with a very large customer' is an industry first and changes the landscape by giving certainty to Micron that a customer is contractually locked-in to buy large quantities for 'years'(5 in this case). That is not a trivial development. And let's face it, others will now get worried and also lock in long term deals or face exclusion.Remember two weeks ago when Jensen said 'we have secured our supply chain'
I am highly confident we won't stay at these levels for long. Analysts will certainly update their models this week as well.
The deal would look something like this:
Core Deal Structure
Size & Term: ~$100 -$130 billion over 5 years, covering HBM4e, HBM3e, and potential HBM5 supply for NVIDIA’s Vera Rubin AI and future GPU platforms.
Payment & Guarantees: NVIDIA commits to minimum annual purchase volumes (~$25 billion/year). Payments include base contract pricing plus potential escalators tied to wafer costs or memory market spot-rate increases. Shortfalls in volume may trigger penalties or make-good clauses to protect Micron.
Benefits:
For NVIDIA: Secures long-term HBM supply at hyperscale, ensures priority access, and hedges against extreme spot-market volatility.
For Micron: Guarantees $130 billion revenue over five years, improves production planning, and shares some market risk with a major customer.
Flexibility & Technology Alignment: Volumes and HBM generations may adjust over the contract to match AI demand growth, with co-optimisation of HBM designs for NVIDIA GPUs. -
It was a Trig moment, calling Rodders 'AL'
