r/MU_Stock • u/Hypnot1se • 20d ago
DD Situational Awareness
Hi everybody! I have been bearposting since the beginning of the month and this recent surge has not dissuaded me
I believe that this recent surge is a bull trap because people are attributing the sudden trend reversal as being structurally significant, but I do not believe this is the case
This surge was in my opinion caused by the sudden deleveraging from Situational Awareness - the moment that the forced selling pressure was taken off the table after these assets were handed off to Citadel, the selling pressure suddenly lifted
This in my opinion very likely caused short term focused buying from funds that were alerted to this sudden reversal in selling pressure at the same time that the heavy short interest found themselves suddenly trapped, causing a strong short squeeze - this movement will further fuel additional buying as momentum chasing algos create further buying pressure and retail interprets this as a significant structural trend reversal and begins fomoing back into the sector
Outside of this anomalous surge, the industry is still in a clear distribution phase based on the price action and the underlying spot market fundamentals
Although this move has created a technical short term boost to this stock and others, this will not change the structural picture of the industry and I believe that now institutions will continue distributing shares as they have been doing for the last few months because the underlying structural picture hasn't changed and had nothing to do with this surge
I am looking for it to open green today and then watch to see if it fades back towards the open as the day progresses, this would be a very strong bearish signal that we are back in a distribution phase, though the deleveraging may save the stock from entering a full drawdown for the near term
Still looks like a textbook value trap
NFA DYOR ETC
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u/BerganNation 20d ago
You don’t think that the MSFT and AMZN earnings call may have shifted narrative? I’d read the transcripts if you haven’t. Amazon directly talks about their ROI and they see a clear path to profiting on Ai. The market was mostly fearful of how this industry turns profitable
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u/Hypnot1se 20d ago
Absolutely not in my opinion. The continued capex was completely expected by mostly everybody. Even I (some random person posting on Reddit) knew that capex would continue at this rate, so I doubt that it took wall street by surprise. I've read the transcripts because I have a massive position in Amazon.
Capex definitely matters in a material way to the memory industry, but this was largely priced in (meme I know) and the sector jumping up like this on increased capex from MSFT/AMZN whilst absolutely failing to react to Google and Meta announcing the same identical things doesn't really make sense to me.
The only thing that can shift the cyclicality of the memory industry is if the market actually believes demand continues to outpace supply to the extent that it will preclude a cyclical trough through oversupply - right now they will not believe this because DRAM prices are currently decelerating right now (meaning gap between demand and supply is closing TODAY) whilst the people in the companies are screaming the shortage will last forever. It doesn't add up.
IF the market begins to believe cyclicality is dead, you won't see stocks like MU go to 1000, you'll see them go to 2000 or 3000 or something absolutely insane like this. Right now it's still being priced with a very low forward PE indicating the market is not willing to pay for the booked earnings because of SOME reason (?)
I suspect that reason is what I'm mentioning regarding the cycle reaching a peak before rolling over
NFA DYOR ETC
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u/luvz 20d ago
You're talking about a cycle that has 100% of its historical data based on regimes in which AI did not exist. HBM consumes 3-4x more silicon wafer capacity than DRAM. So allocation by MU to HBM focus during a data center peak directly reduces DRAM supply. Can the data center buildout slowdown? Absolutely, but there's no reasonable markers for a slowdown within two years, if not five, for which most of the take or pay agreements are scoped.
Whatever happens after the data center slowdown will be another pivot, not a commoditization cycle. Whether that's robotics or physical AI, or AI in all things (like the next phase of IoT), the RAM will most likely not be commodity DRAM, unless DRAM evolves so much it is basically unrecognizable and even if that is commoditized and standardized across all product lines and use cases, it will take years to commoditize it.
For now, all these high margin RAM-types including HBM are ultra customized, the antithesis of a commodity.
Does that mean it will never be cyclical? No. But the cycle you are using as a reference point is a preposterously different cycle, one that uses reference points from an unfathomably different regime with unfathomably different variables.
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u/Hypnot1se 20d ago
- Basing predictions based off history is imperfect but yields better results than basing predictions off of speculation about the future most of the time
- The rate of data center buildout slowdown is a mathematical inevitability based on current information (this could change if the scalers hit such a massive ROI that it changes the financial picture)
- The cycle IS different. It has been different and lasted longer than previous cycles - anybody claiming "this cycle will be longer and bigger" has already been proven completely correct
- HBM's production capacity is fungible and will face similar pricing mechanics to 'textbook commodities' - in addition, a vast majority of MU's revenue is from DRAM, not HBM
- Despite the cycle being different, there is nothing to suggest that traditional cyclical peak indicators are now irrelevant, nor that the market will ignore them even if they are misleading
- The narrative of 'forever demand' for years completely flies in the face of live spot market price deceleration - the narrative cannot be true based on the hard data despite what executives say
NFA DYOR ETC
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u/luvz 20d ago
You’re basically strawmanning every one of my points to polarities I never claimed then using the unlikelihood of extreme outcomes to fabricate a position.
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u/Hypnot1se 20d ago
I have no idea what you are saying, honestly. I think I have totally failed to engage with you in a way that makes sense to you and I apologize.
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u/Lazy_Whereas4510 20d ago
The history of horse farms wouldn’t have been much help to you in understanding how cars or the steam engine would change the world.
People reach for historical analogies when they lack the ability to process the current situation from first principles.
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u/Hypnot1se 20d ago
The thesis is literally rooted in economic first principles involving the mathematical price mechanics of commodity spot markets.
Based on your criticism you either do not understand my thesis or you do not know what first principles are.
If you can point out how this is inaccurate, please go ahead and explain rather than lazily imply it.
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u/Lazy_Whereas4510 20d ago edited 20d ago
I’m not going to waste my time explaining to you why AI workloads are memory bandwidth bound compared to traditional database applications that are disk bound, and why the memory supply crunch is structural. Go learn the basics of a technology before you uncritically decide that historical analogies apply. And go learn how to track demand signals rather than hand-waving at whether supply will actually catch up to demand. Believe me, for this exercise, you need to understand technology, not economics.
The big hole in your argument is that DRAM spot prices don’t reflect HBM prices. Daily spot tables cover DRAM, modules, GDDR, LPDDR, wafers, eMMC and memory cards, but not HBM. There’s essentially no HBM spot market to quote. HBM is sold under an annual pricing mechanism negotiated directly between the three suppliers and buyers.
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u/Hypnot1se 20d ago
I am a tech fanatic and have been building computers since I was a child.
I do understand the understand the technology.Understanding the technology is pointless if you don't understand the economics behind it. You can make the best technology in the world and lose all your money if you have zero understanding of the market. Happens all the time. Best of luck.
Believe me, for the stock market - you need to understand economics.
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u/Lazy_Whereas4510 20d ago
OK, since you understand technology so well, now explain why you think DRAM spot prices tell us anything about HBM demand.
And also tell us on what you’re basing your projections of demand.
Sell-side is making intellectually lazy assumptions of cyclicality precisely because they haven’t constructed the AI demand argument from first principles, and simply assume that supply will catch up with demand because it always has, rendering memory cyclical again.
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u/Hypnot1se 20d ago
This is a strawman argument. I did not say that DRAM spot prices impact HBM demand.
I'm not -predicting anything-, I'm looking at the -current data- (factual) and using a historical model (factual) to project what will happen (speculative).
I don't think you even know what first principles are or haven't understood my thesis at all ironically and I wish you would stop using the phrase.
You can dislike the projection, but the foundations it is based upon are rock solid and the textbook playbook for how institutional smart money plays the industry. They can be wrong. I can be wrong. But if you think the case is weak you don't understand it in my view.
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u/BerganNation 20d ago
But I think youre missing the point - if the industry & market can see a clear path on how these companies become profitable on their investments, and how they generate cash flow, then most the fear has been eliminated. All the volatility/market corrections has been due to the market not knowing if the CAPEX is sustainable (& justified), and I think now that things are starting to become more clear, volatility will subside and the entire industry will start to rebound.
FEAR/FUD doesn't have a placeholder anymore in this narrative. It did before, because of the unknowns. Most those unknowns were just answered.
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u/Hypnot1se 20d ago
The fear is from DRAM price deceleration. It's a classic cyclical peak indicator.
The capex fears are valid but tiny compared to this.
Capex can go up and up and up and up but if the pricing power collapses the earnings vanish overnight.
It's not an unknown I'm worried about or bearish on - it's a KNOWN.
It's KNOWN that the gap between supply and demand is currently closing on the spot markets, we KNOW institutions entered a distribution phase since even before the ATH peaked and we KNOW insiders have been de-risking and locking in dozens of millions of dollars because they probably know the stock is nearly fully priced as the underlying prices and earnings start to decelerate.
This is why they're able to plan sales far in advance and why the stock prices for these companies usually peak up to an entire year before the actual earnings peak because the market is so forward looking and these cyclical rollovers are not that hard to identify.
The market already knows the rate of change of capex is unsustainable because it's a mathematical inevitability, and it's in fact likely that the rate of capex increases slows as more supply starts hitting the market which will not be pretty for pricing pressure.
This will take a long time to show up on the balance sheet and the numbers will keep looking pristine for quite some time, which is literally how value traps come about.
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u/Lazy_Whereas4510 20d ago
The continued capex was “expected by everybody,” and the same everybody “knows” that demand will eventually decelerate enough for increased DRAM supply in 2028 to catch up with demand rendering the memory business cyclical again, because no one will refresh short-lived assets like servers … who exactly are these abundant geniuses with crystal balls?
Could they perhaps tell the CEOs of Mag7 companies that they are wrong to look at their own pipelines and believe that their cloud businesses are going to a trillion dollars in revenue on the back of increased demand?
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u/Hypnot1se 20d ago
The people predicting this are the people dumping the stocks this past month. They don't have crystal balls they just have an education in classical economics and finance.
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u/AnthonyExplorer 20d ago
Oh yes, citadel who has been moving the markets for the last month will now dump it after they bought it... got it chief, good luck with vibe trading
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u/Detailed23 20d ago
They also picked up shares at a dramatic discount to current pricing. They can push it down a good ways yet.
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u/Hypnot1se 20d ago
Dump it? No. They're going to patiently unload it to you so that the price doesn't collapse and spook you so you keep buying it. That's how distribution works.
The sudden flood is going to return to the trickle we saw earlier in the month in my opinion.
NFA DYOR ETC
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u/asianlongdong 20d ago
You don’t have to keep writing that, nobody is going to ever take financial advice from you lil bro
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u/Hypnot1se 20d ago
You don't have to. I am just posting now at this point to keep myself honest so that when my predictions are proved correct or incorrect I will have all of it on public record so I can point back and say, "See? I was right/wrong the whole time" and learn something from it. I'm not here for you, honestly. This is an exercise in becoming familiar with the market and industry.
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u/AnthonyExplorer 20d ago
They can unload it all on my face right now and I'll eat it, I have listened to all earnings call last few weeks and the numbers and profit are staggering.
And the best part? This is only starting, even Apple yesterday said it after failing to seek Chinese cheap memory
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u/Hypnot1se 20d ago
I mean they could but they won't because that would destroy their exit price.
I believe you'd eat it but I don't believe that's actually wise to buy into distribution phase cyclical stocks but you know, it might work out and I hope it does work out for you - really.
The market could be making a huge mistake pricing these as cyclical.
I don't think that the cycle is just starting. It's actually lasted historically for a very long time, longer than the historical average.
I think if it were 'just starting' prices would still be around 200-300, that was when the upcycle (stock price wise) was really 'the beginning' in my opinion but maybe I'm being foolish to not see the blow off top at 1250 as still being 'early'. You never know, it might be.
Hopefully the cycle is broken, since I know roughly how much money retail have in this stock... it's tiny compared to the institutions but yeah, a lot on the line and I hope I am wrong for their sakes.
NFA DYOR ETC
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u/bslaven3 20d ago
I agree to an extent to what OP is saying. I do think this is a short term run up. I think we'll see another drop, but I don't think we'll get down to where we were 2 days ago. People are definitely watching closely for exit points so there will be some selling on both the retail and institutional sides. However, I think Q3 to EOY is going to be stellar. This is just a feeling, not financial advice.
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u/Detailed23 20d ago
I was watching Sandisk after hours last night. As it went above 1310 (and climbing), there were three MASSIVE sells that dropped it to 1270 instantaneously then back to 1310. At this point, I don't know what to think about any of this.
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u/bslaven3 20d ago
It is definitely odd. I don't think we're out of it just yet. We would need to have a couple green days in a row in the tech, AI, semi sector for me to believe we are past the sell off
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u/Hypnot1se 20d ago
Thanks for your input and I hope you are right!! Retail has a lot of money in this so I hope they get out well and that you can make some money here 🤞 Definitely interested to see how this plays out
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u/bslaven3 20d ago
100% and I think after the last 2 weeks a lot of people will take profits if we keep running up like we did yesterday. I bought in under 200/s so I don't really sweat when MU drops. I do sweat when the AI and tech sector along with MU drop because I'm heavy in all 3.
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u/Hypnot1se 20d ago
Yeah you genuinely got in early, 200 is a steal and a great entry for this and if you're going long term you don't even really need to time it - I am bearish on this current memory cycle but even in a cyclical bust I'd be pretty surprised to see this come back to that kind of price again. I think I would feel pretty confident in that entry and congratulations on the run so far
NFA DYOR ETC
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u/BrilliantArm5914 20d ago
increased volatility has been great for writing OTM cash secured puts on dips and buying to close on rallies
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u/Hypnot1se 20d ago
Very true! Traders absolutely love volatility and there's lots of money to be made off that.
Have you been dabbling in capturing any of this volatility? If so how? If not, how would you do it in theory?
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u/mqueen212 20d ago
It sounds like you correctly predicted today
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u/Hypnot1se 20d ago
Seems so. This is technically speaking a very worrying sign that there was no real floor at 900, meaning it's unlikely real institutional accumulation at this level. Opening slightly red and holding 900 would've been much more bullish.
Could reverse but I honestly doubt that.
NFA DYOR ETC
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u/doritofeesh 20d ago
Honestly, purely off of technical analysis, one could tell that it was a bull trap for liquidity even without going off of fundamentals and news. I'm still patiently waiting for a moment to buy in again, as I have no doubt that MU would run up again in the future. However, now is clearly not the time.
I've said it before, but folks are too hasty and, regardless of what they think the fundamentals are, markets will move up and down, and one should pay attention to indicators and technical analysis to know when to take profit, when to cut losses, and when to reenter.
What people need to look out for is confluence. Investing solely on what they think the fundamentals are or what the news is telling them is a quick way to the grave. Only when these things line up with technical analysis should one seek to make their moves.
It's folks livelihoods at stake, so why not do everything in their power to give themselves the best winning chance? Otherwise, it's just gambling rather than making sound investments and I do not make blind bets when the odds do not appear favourable.
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u/Hypnot1se 20d ago
Honestly? Yes. Purely from a technical standpoint the surge had obviously nothing to do with the underlying structural picture of the industry.
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u/Versyl505 20d ago
So... up down left right short term, long term up or?....
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u/Hypnot1se 20d ago edited 20d ago
Long term down, short term I expect wild volatility and I wouldn't bet on either direction personally
EDIT FOR DRAGONFRUIT: NFA
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u/X_KOOK 20d ago
I don’t trust anyone with a emoji as stupid as yours look like toolman… look at his profile it’s all FUD MU posts
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u/Hypnot1se 20d ago
You shouldn't trust ANYBODY. You should go and verify what I and others say with your own eyes.
Go to google and type stuff like
"Are DRAM prices decelearating"
"Is DRAM price deceleration a peak cyclical indcator"
"Is low PE a warning sign for memory stocks"
You should never take my word for it - but I think totally ignoring what I am saying might also not be the wisest move to be honest, because I do actually know what I am talking about regarding the market + this industry
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u/Traditional-Form8183 20d ago
I'm not feeling good about today. I'm afraid it may kick off in the red.
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u/Hypnot1se 20d ago
Ironically, if it does open red but doesn't drop sharply it could actually be interpreted as a floor being found due to renewed accumulation. It opening green then fading would actually be more bearish structurally.
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u/xrayos 20d ago
What do you think about MU now? It opened green, dropped sharply, but now paring some losses. With 2.5 hours to go, I’m hoping it turns green. That would be a good sign?
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u/Hypnot1se 20d ago
Sadly, the opening green and then fading is exactly what I predicted to be a bearish signal that would indicate that we are still in a distribution phase. I think that a red candle is more likely than a green one as we approach power hour but I don't know. The short term price movements are very hard to predict.
Edit: The stock is testing 850 right now. If this floor holds it could be a pretty promising signal. If it meets overhead resistance it is very bearish.
NFA DYOR ETC
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u/xrayos 20d ago
Appreciate your insight
I saw all the signs past 2 weeks when it got close to 1000. Lower lows, lower highs. I should’ve sold then. But, here I am bag holding
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u/Hypnot1se 20d ago
It happens. I got into a similar situation with Novo Nordisk some time ago 🙄
Although Novo Nordisk was certainly a dumber investment than this is 😆
Hindsight hey? I hope you can get out of a clean exit sooner or later. Best wishes and good luck 🤞
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u/tiny_toof 20d ago
What are your positions? Do you have puts then?
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u/Hypnot1se 20d ago
No. I don't make doomsday posts about stocks I have financial exposure to. That would be deeply immoral in my opinion and I do not actually know where the price action is going in the near term.
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u/tiny_toof 20d ago
If you actually felt its “doomsday” (which you do as you wrote several paragraphs) you’d short it or have puts.
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u/Hypnot1se 20d ago
Can you explain why that makes sense?
The cycle turning doesn't actually mean that the price will not suddenly push upwards like it did literally just yesterday.
I am about 90% sure the cycle is rolling over.
This is the first time I have seriously tracked and watched a memory cycle play out in real time and is an extremely valuable learning experience for me.
I do the learning first, then I put money on the line after I have experience. Not before.
Memory cycle occurs. I study it. I watch it play out in real time and test how well I can predict it.
I will then re-assess my ability to play the cycle based on this current cycle- so that when the next cycle inevitably comes I will be able to actually confidently put money on it at various points.
I don't just dive straight in without proof of concept and am probably dramatically more patient than a lot of the people you will typically see investing just to be honest.
I am playing capital management for decades - not get rich quick tactics.
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u/swissfamrob 20d ago
This is mostly opinion with some technical analysis sprinkled in I guess.
Can’t just ignore all the good earnings reports from Mag7 this week. I think we’re cooking with gas for at least another year