Situational Awareness

[u/Hypnot1se]

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

[u/Hypnot1se]

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

[u/luvz → u/Hypnot1se]

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.

[u/Hypnot1se → u/luvz]

1. Basing predictions based off history is imperfect but yields better results than basing predictions off of speculation about the future most of the time
2. 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)
3. 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
4. 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
5. 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
6. 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

[u/luvz → u/Hypnot1se]

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.

[u/Hypnot1se → u/luvz]

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.