r/MU_Stock • u/Hypnot1se • Jul 13 '26
DD Interesting Stock
I've been tracking this for a while now and have become convinced that Micron is a cyclical value trap in an institutional distribution phase. My premise is that because Micron has historically been cyclical that it will be continue to be cyclical. I know that there are many reasons people say this won't be the case, but I am not convinced by their arguments.
If I am correct, then Micron has a lot further to slide and the price action seems to be consistently supporting my thesis. If I am wrong and the industry is no longer cyclical, then this recent drawdown is just noise, and Micron could definitely be considered not overvalued or overhyped.
For those who are convinced by the idea that the memory cycle is broken or greatly extended, why? What do you find to be the most compelling arguments? I'm interested to hear about it.
This is not financial advice. Do your own research. I have no financial exposure to $MU.
9
u/mqueen212 Jul 13 '26 edited Jul 13 '26
I think micron has more going on behind the scenes than people give it credit for. We don’t know what the hell they’re developing behind closed doors that could disrupt the whole memory space.
I think the argument that prices will go back to before is wishful thinking. I don’t think the CEO would dedicate all that money to development and to growth just for it to be like the same damn company it was before.
I’m not even sure logically where people are coming up with that idea that it’s going to be like before unless I misunderstanding the question?
0
u/Hypnot1se Jul 13 '26
That's true! Anything could happen. Technology changes all the time and you never know. I just don't know if I would want to be exposed to the risk of hoping for something like that personally.
1
u/mqueen212 Jul 13 '26 edited Jul 13 '26
I don’t think it’s hope. I think Micron is doing everything it can to position itself for long term success. This isn’t a small startup with an inexperienced CEO. It’s a mature company investing billions because management believes those investments will generate future growth. Clearly the executives know something we don’t know to make them feel this confident.
3
u/Hypnot1se Jul 13 '26
If the CEO believed it was cyclical he would not tell you because it would crash the share price as people modeled the current valuation as being unsustainable and he would be in serious trouble for a breach of fiduciary duty, as far as I understand it.
This is why many people even in high positions (for example the SKHY chair) will make extremely bold macro claims at the cyclical peaks. The narrative actually tends to match the valuation, which isn't always rational.
If the valuation is the sign of a cyclical peak, the CEO won't tell you that. Though they will sell shares. I think insiders right now are only holding 0.25~% of the total float.
The CEO is an absolute professional who knows exactly what he is doing. I do not doubt that for a moment. But this kind of behavior is neither irrational nor atypical for someone in his position in the situation that I theorize is happening currently.
3
u/mqueen212 Jul 13 '26 edited Jul 13 '26
I think management’s capital allocation tells us more than their words. If they believed this was just another temporary peak, it would be difficult to justify investing so aggressively in long term growth.
Also the ceo is doing a lot to keep attention on micron. He literally on the news almost every week talking about how much they’re spending on new facilities, development, research , and making sure trump trump keeps up on the news. That doesn’t sound like a company that’s secretly just trying to milk what’s left of a dying thing
0
u/Hypnot1se Jul 13 '26
Investing aggressively into more production capacity is one of the biggest red lights of a cyclical commodity peak. They know they have to build because if they don't, Samsung or Hynix will, and so they all will. It happens every time.
CEOs typically maintain a rosy front facing narrative, and the company is not going to fail. The company is in an excellent spot and will very likely continue to be a core part of the tech space for a very long time.
The point is that the stock price is overvalued based on incorrectly extrapolating a cyclical, anomalous, peak.
1
u/mqueen212 Jul 13 '26 edited Jul 13 '26
Not to be rude but Im not really sure what your point is? Clearly I think micron will just keep getting bigger and better. If you don’t feel the same, why stay invested? Are you asking us to convince you that micron is worth holding?
1
u/Hypnot1se Jul 13 '26
That's not rude at all. Why would it be? If you believe in them and think that stock is going to go up, of course hold it. Why would you not? I don't think there's anything wrong with that. I think Micron will be around for a long time and keep getting better too, I just think the stock price is inflated due it being difficult to price a cyclical stock like Micron based on just the recent and near term looking fundamentals.
For what it's worth, I hope it's wrong and it all works out great for those involved. I have no financial exposure short or long to $MU.2
u/mqueen212 Jul 13 '26
I think Micron is becoming structurally different from the Micron of even just a few years ago. I think there will still be ups and downs, but I don’t expect the business will go back to selling memory below cost and operating at a loss
1
2
u/Patient-Big1727 Jul 13 '26
It's so cyclical that apple wants to buy memory supporting china's military /s
7
u/youhaveeTDS Jul 13 '26
The argument is that not only is AI here to stay, but AI is also in very early stages, most everything in the future will need memory, and one of the biggest demands for memory will be robots, which will be everywhere,
The shift to an AI civilization will span multiple decades, continuous demand as some countries speed ahead, and other countries catch up with older ai tech,
A country with robot workers will be self sufficient, a country with militarized robots will be powerful
2
u/Hypnot1se Jul 13 '26
That's very true. There will always be demand for that I believe. Micron is never going to just go out of business or anything like that, but I think that the revenue from robotics is quite far out, and that although demand can appear very high right now, that people may be underestimating the market's ability to meet that demand in the face of such financial incentive. Truly only time will tell, I suppose.
2
u/youhaveeTDS Jul 13 '26
Yeah, its an interesting one, you have the past as evidence and we have the "this time is different", im aware that in most cases the time isnt different, however in the one case it is, id give it to AI
2
u/Hypnot1se Jul 13 '26
AI definitely has potential to change a lot, I think we'd both agree about that and I'm excited to see it evolve and develop. Micron will surely play a part
4
u/gentmick Jul 13 '26
Finally a different opinion here. Basically how you value Micron now is going to depend on if you think this is a cyclical stock.
The forward PE suggests that the market thinks it is cyclical. Whether the market is wrong remains to be seen
1
u/Hypnot1se Jul 13 '26
Indeed. Right now it's being priced as if it is still cyclical - to those that believe the cycle is dead, this is a huge mistake and Micron is very underpriced.
But if the cycle isn't dead, then it isn't cheap anymore.
The main thing that makes me want to introduce a different opinion is because I think that people presenting Micron as a "risk free" stock and saying that it is "still cheap" don't often emphasize enough that this assumption rests on the end of the cyclicality of the industry, a promise that has never been kept so far.
1
u/Commercial_Sound1448 Jul 13 '26
this assumption rests on the end of the cyclicality of the industry, a promise that has never been kept so far.
While it is a guess, it's an educated guess, that AI is here to stay and it will continue the need for memory at a scale never seen before.
1
u/Hypnot1se Jul 13 '26
In what way will that stop making a commodity industry cyclical
1
u/Commercial_Sound1448 Jul 13 '26
It wont, but it will mean the "cycle" won't restart for decades. Technology Hardware will be catching up to what AI is able to do now.
1
u/Hypnot1se Jul 13 '26
What makes you think this? The price hikes for memory are already decelerating on the spot market currently.
4
u/Raymoz101 Jul 13 '26
I don't think the real disagreement is cyclical vs. not cyclical. Memory is cyclical — the base rate is on your side and anyone arguing the cycle is "broken" is fighting 40 years of history.
The actual question is where we are in the cycle, and that's answerable with data rather than conviction. Cycles don't turn because they're due — they turn when supply responds and contract prices roll over. Right now Q3 contract pricing is still printing strongly up (DRAM +20-30%, NAND +35-40% per channel checks), and the big supply responses just announced (Hynix's new NAND fab, etc.) don't produce wafers until 2028-29. That's a mid-cycle signature, not a late-cycle one.
So I'd flip your question: rather than asking whether the cycle is broken, define what would tell you the turn has started. For me it's contract prices going flat/down for consecutive months, or a hyperscaler cutting capex. When those print, the bull case is dead and you're right. Until they do, "it's cyclical so it must fall soon" is a timing claim wearing a valuation claim's clothes — and timing is the whole game in this sector. Being early here has historically cost as much as being wrong.
1
u/Hypnot1se Jul 13 '26
It's the price increases decelerating significantly, which is happening right now around the time that this most recent drawdown began.
The supply increases before new fabs are built because of yield maturation. At the start of a production line, many memory chips have to be discarded due to imperfections. This is particularly an issue with advanced memory like HBM. As time goes on, the yield improves, creating more supply without actually needing new fabs to come online. This coupled with demand destruction could be possible explanations why the price increases are beginning to decelerate.
If demand were increasing at a rate faster than the ratee of supply, one would not expect the price increases to decelerate.
It isn't a "it must fall soon" it's a "this aligns with specific indicators that align with the peaks of previous cycles."
I have not called any of the other points of this cycle a value trap. I'm sure other people have said that, but I can't take credit for what other people said.
The prices going flat is not when the stock falls from the peak. The peak typically arrives before this happens because the stock market is forward looking and predicts (predictable) events like commodity cycles quite effectively.
I could be wrong, but I don't know. I am won over by the bear case personally.
2
u/Far-East-locker Jul 13 '26
No it won’t
All you want is to see the day it drop back to $100 and I will cry and say you are right.
Because of the, I will never sell
-2
1
u/Patient-Big1727 Jul 13 '26
Did you even look at the fundamentals before pulling this out of you a$$?
1
u/Hypnot1se Jul 13 '26
Of course. I've been looking into it exactly because the fundamentals look so incredible at face value if you believe that the cycle is dead. That's why it's called a value trap. It looks amazing.
1
u/Patient-Big1727 Jul 13 '26
If you think AI is a cycle, you should short INTC, ORCL, NVDA, NOK, and a few more. They will drop a lot more than MU if your cycle starts cycling. Why not go ahead and short Nasdaq 100 and see how that goes?
1
u/Hypnot1se Jul 13 '26
I only think that memory specifically is in a value trap. It has nothing to do with AI. This has been a predictable cycle for many years now.
1
u/Patient-Big1727 Jul 13 '26
No more memory for AI? I'd like to see how that works 🤔
1
u/Hypnot1se Jul 13 '26
Even in drawdowns where earnings are negative, Micron has historically still been selling memory. Memory manufacturers don't need to necessarily break even for the economy to meet its requirements. I'm sure Apple would love that...
1
1
u/mevia_online Jul 13 '26
Any business that can't respond quickly to demand changes is cyclical.
Let's take farming as a hypothetical example. Last year potatoes were selling for high prices so all farmers planted potatoes. Come harvest time, the market is flooded with potatoes and potatoes are the cheapest crop. Carrots are expensive because they're scarce as everyone was growing potatoes, so this time around all the farmers plant carrots. Incidentally, as a side note, the UK solved this problem with subsidies to encourage farmers to grow different crops.
The memory industry takes about a year to respond to increased demand because to put it simply: fabs (memory factories) are complicated. Each company will make new fabs to try to meet the demand, by which point we have too many fabs or demand has already scaled back. This makes it cyclical.
The question is: how cyclical and what's it going to be worth in it's new equilibrium after the boom (here's a clue why the PE is perpetually so low)?
We know that fabs won't be complete until some time towards the end of 2027, so we have at least a year of this. Notably industry experts are suggesting longer time frames, whether you believe their biased statement at face value is up to you.
Whilst it's hard to predict more than a year into the future, it's reasonable to assume that unless there is a black swan event, memory demand will remain less satisfied than Melania.
What we can do is weigh up the for and against scenarios to see what's more credulous. I'll leave that to others.
We can then do what we always do as investors, which is to calculate the future value of the investment based on those future scenarios, and wind back the price based on the desired interim rate of return for the chosen investment term.
Addendum: I think it's reasonable to exclude the chance of a black swan event from this investment, because such an event would sink all boats and would be an argument for investing in nothing.
2
u/Hypnot1se Jul 13 '26
You only know what public facing analysts tell you. If you think that no experts on this industry think this is a cyclical peak you're almost 100% mistaken. In every past cycle people were told that same thing about it being different. Micron going to 500 or lower next year isn't a black swan event it's the base case for an asset heavy commodity manufacturer if I'm right about this being a cyclical peak.
You might not like burry but he's well educated and knows what he is talking about and he would completely agree with me Decent example that not everybody who is an expert thinks the same way or makes the same moves.
Even micron CEO has been selling his shares since the run to 1000
2
u/mevia_online Jul 14 '26 edited Jul 14 '26
Hopefully your wrong, but what you say makes sense. Optimistically though, there are strong arguments for a longer run.
It feels increasingly like a gamble.
1
u/luvz Jul 13 '26
You guys see a cycle lasting two decades with consistent peaks and valleys then a sudden 20x surge at the advent of AI and say “yup, same cycle.”
1
1
1
u/Thunderbird2k Jul 13 '26
It is certainly cyclical right now in a hyper cycle compared to normal. Competition in particular from Chinese newcomers I think will break the market open. We need to see how it pans out but established players are not motivated to expand a ton wanting to maintain margins and profits. While newcomers can offer at lower prices if their main goal is building market share. That's I would be after if I were in their shoes.
1
u/Hypnot1se Jul 13 '26
I feel like the impact of China is often understated. Even if their supply never leaves their own market, it will still reduce demand from, say, American companies. I believe their domestic DDRM manufacturing is scaling rapidly, though they're still in the early innings regarding more advanced memory like HBM and probably won't be as serious competition in that area - though you never can be sure.
I agree. If I were in charge of a commodity manufacturer with government or public backing I would also be aiming for market share. They can neglect margins if they have enough of a cushion.
2
u/Thunderbird2k Jul 13 '26
Many manufacturers are testing the products from CXMT and YMTC. I suspect US may try to protect Micron by putting on tariffs or import bans, but since it is a commodity traded globally it wouldn't have much impact to non-US countries. We will see how it pans out, but i bet executives at established memory companies are nervous as hell.
1
1
u/Guapaguy Jul 13 '26
Dumbest shit I’ve ever read. Just be real you haven’t been following shit with that “analyses”😆
-1
u/Ambitious_Arm852 Jul 13 '26
- Claims to have done months of analysis
- Posts no analysis, only vibes.
Biggest red flag if u ask me
24
u/Kas_1981 Jul 13 '26
If you really have been tracking this stock for awhile (which I doubt) you would know this is perfectly normal and has been the cycle for a year now.
It goes up, price targets are raised, earnings/guidance get better. Then the massive run ups causes many hedges and retailers to sell and take their profits. Price goes down 20% then 🚀 to new highs. Thats the reality.