Micron Technology, Inc.

(NASDAQ Global Select)
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Bullish +65

Memory Stocks Are Plummetting. Jensen Huang Says the Bears Have It Wrong.

AI infrastructure AI-generated analysis

πŸ“‰ Memory stocks including Micron have plunged roughly a third from their July peak amid fears of cyclical downturns despite reporting blockbuster results.

πŸ—£οΈ Nvidia CEO Jensen Huang defended the memory sector, predicting no oversupply until after 2029 and noting that demand can always expand to utilize more memory capacity.

πŸ’° Micron reported a gross margin of 86.8% and an operating margin of 80.7% in its latest quarter, indicating extreme pricing power in the current market.

πŸ“… For the upcoming quarter, Micron expects a modest decline in gross margins to 85.95%, suggesting supply is approaching its tightest point.

πŸš€ Long-term demand drivers for memory include emerging physical AI products such as robotics and self-driving cars entering the market.

πŸ’΅ Micron currently trades at a forward P/E of just 5, which analysts suggest offers a favorable risk/reward profile if profits are sustained.

Bullish Signals
  • Micron reported an impressive gross margin of 86.8% and an operating margin of 80.7% in its most recent quarter, retaining over four dollars in pre-tax profit for every five earned.
  • Nvidia CEO Jensen Huang stated that a memory oversupply is not expected until after 2029, reinforcing the long-term supply-demand dynamic favoring memory manufacturers.
  • Micron trades at a forward P/E of just 5, presenting a potentially undervalued entry point given its future profit potential and capacity for share buybacks.
  • The article highlights growing long-term demand for memory driven by the rollout of physical AI products like robotics and self-driving cars.
Risk Factors
  • Memory stocks have declined significantly from their peak, trading down roughly a third despite continued strong financial performance and no easing in the supply shortage.
  • Micron forecasts a modest decline in gross margins to 85.95% for the next quarter, indicating that current pricing levels may be near their peak.
Full Analysis
The article addresses recent volatility in memory stocks, including Micron Technology (MU), which have declined significantly despite reporting blockbuster financial results and no evidence of an easing supply shortage. Jensen Huang, CEO of Nvidia, defended the sector at GTC Berlin, stating that a memory oversupply is not expected until after 2029 and emphasizing that demand for memory can always increase to meet performance needs. Micron reported exceptional profitability in its most recent quarter with a gross margin of 86.8% and an operating margin of 80.7%, retaining over four dollars in pre-tax profit for every five earned. The company forecasts a modest decline in gross margins to 85.95% for the next quarter, suggesting current pricing is near its peak but supply remains tight. Analysts argue that Micron's valuation appears attractive given its forward P/E of just 5 and the potential for sustained profits over the next three years, which could support share buybacks. The long-term outlook points to growing demand driven by physical AI applications like robotics and self-driving cars, though the duration of the current market cycle remains uncertain.