Micron Technology
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I think Micron's current share price is largely explained by a combination of profit-taking, fear and political uncertainty rather than any deterioration in the underlying business.
After an extraordinary rise of around 900% over the past 18 months, plenty of investors are sitting on enormous profits. That naturally creates selling pressure, particularly given memories of previous DRAM downturns. People react to any news.
The US midterm results have added another layer of nervousness, with concerns about Democratic opposition to data-centre developments. Personally, I think the market is overreacting. AI infrastructure investment isn't going to stop. If certain states make development difficult, projects can move elsewhere, including overseas.
Meanwhile, the fundamentals look exceptionally strong:
Demand continues to accelerate, particularly for DRAM and HBM, while supply remains constrained and memory prices continue rising.
The supply chain is consistently warning of prolonged shortages. Memory manufacturers, equipment suppliers and industry analysts are increasingly talking about several years of tight supply, potentially extending towards the end of the decade. This is looking less like a traditional short memory cycle and more like a structural shortage.
UBS's projections are extraordinary. It forecasts global DRAM production rising from 36 exabytes in 2025 to 89 by 2030. Yet its more ambitious agentic-AI scenario suggests potential demand of 282 exabytes. That's a staggering 193-exabyte shortfall, with projected supply meeting less than one-third of potential demand. It's a scenario rather than a certainty, but illustrates the scale of the opportunity.
Long-term customer agreements are providing greater visibility into future demand and pricing than we've seen in previous memory cycles.
Micron's substantial share buyback programme becomes eligible to commence on 9 December. Management intends to return excess cash to shareholders over time, primarily through repurchases. Given the enormous cash generation, this could become a powerful additional source of demand for the shares and boost earnings per share.
I think the market is still looking backwards at Micron's historical boom-and-bust cycles rather than appreciating how fundamentally different this AI-driven demand cycle could be.
And remember, a share price rising 900% doesn't automatically make it expensive if earnings and free cash flow have grown even faster.
Of course, memory will always have an element of cyclicality, but when much of the supply chain is warning that demand could outstrip supply for years, potentially approaching a decade under aggressive AI scenarios, it's difficult to reconcile that outlook with fears of an imminent collapse.
My view is that the current weakness is predominantly profit-taking and fear, not deteriorating fundamentals. If the industry is even broadly correct about the duration of this supply shortage, Micron could be generating extraordinary earnings and cash flow for years to come.
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Thanks Adam for reply which I agree with.
So are we buying more or selling some in the latest rebalance. -
Looking at the rebalance earlier in the week we were net sellers of Micron at $860-a very small percentage as it happened which simply reflects the then weight cf the target weight. Clearly very close
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Have Micron just shelved opening another memory plant Taiwan
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No that's not correct. This is all about one smaller Taiwan Labour Union demanding unreasonable pay which would equate to $1M per worker up from about 80k. Obviously the company isnt going to pay it. Who would so management have said , OK, you plan to strike and disrupt us, we will not expand the plant. It's a few billion expansion not a new build.
They've already reached an agreement with the larger union, but a smaller union representing fewer than 3,000 workers is challenging it despite substantial proposed pay increases.
Micron is demonstrating that future investment isn't guaranteed if labour disputes continue and I applaud it. Existing production is unaffected, and the suspended plant wasn't due to open until 2028.
Look at Micron's wider investment programme(250b so 2% in this case is immaterial):
Location
Planned investment
USA – New York, Idaho, Virginia and R&D
$200bn
Singapore – NAND and HBM expansion
$31bn
Japan – Hiroshima expansion
$9.3bn
Taiwan – Tongluo acquisition and expansion
$1.8bn acquisition, plus expansion
Taiwan – Taoyuan suspended project
$3–4.5bn
These are multi-year programmes, not all committed expenditure, and include R&D.
The suspended project is tiny relative to Micron's global expansion ambitions. If the dispute isn't resolved, Micron can redirect future capital elsewhere. And any disruption in supply will only cause prices to price so it's a win either way.
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Thank you
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Micron looks like its dropped another 11% today so far.
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Micron looks like its dropped another 11% today so far.
@Jason-Knowles said in Micron Technology:
Micron looks like its dropped another 11% today so far.
Looks like it's DRAM kerfuffle rather than HBM, and I understand that HBM is where the $ is. Although that's uneducated guesswork from someone who doesn't know what he's talking about.
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It's speculation the new Governors will somehow stop the build out. A ludicrous idea.
Firstly all of 27 and part of 2028 is already in construction-nothing happens (no change).
For some of 2028 and beyond im sure whoever builds them will have to deal with more bureaucracy (but actually it's more about who pays for what-eg build up 500 affordable homes and a power plant) but one way or the other the facilities will be built. All States compete for capital-capital means taxes and jobs. Politicians can say what they want to get elected but the reality is if any Governor decides to take the green route there will be a long line of others willing to take the money. It's common sense.No one wants to see days and weeks like these but we have seen them before. Just remember, this is pure knee jerk speculation against the back drop of unmet demand so high there is a long line of takers.
If DC X is delayed there are 5 more ready to jump in and get allocated 'sooner' that they thought.