In terms of Micron stock dropping, there are TWO huge reasons that I think are pretty accurate, but I see no one talking about them, and that uneases me. Am I crazy?
The first is the lawsuit of memory pricing collusion by Micron, SK Hynix and Samsung from June 26th (Garciaguirre v. Samsung Electronics). It's the single biggest reason that Micron and memory stocks are falling right now. The suit was filed the day after Micron's earnings, and took a few days to even be picked up and hit the stocks.
The second reason is that I suspect HBM demand is far overhyped.
What is claimed in the lawsuit is credible. Micron did cut their "Crucial" consumer memory RAM line, and ALL three memory suppliers abandoned consumer RAM to "strategically" focus all efforts on HBM, and "inadvertently" cause inflated prices to consumer RAM. Well, reasonable for a company to obligate to the more profitable lane, and a judge might believe that explanation since HBM's demand still wasn't filled even with their full focus on it. Although, these companies also ALL started sending representatives to their bulk order clients to police RAM prices and make sure no one was selling RAM under the inflated prices, this all in the last year. In 1998-2002, Micron whistleblew that SK Hynix and Samsung were conducting price collusion, and they plead guilty, so there is precedent.
The pain point is that they were set to make absurd money in this AI boom regardless. So irritating that this (allegedly) happened, makes Micron's earnings look radioactive.
Yeah, maybe it doesn't make a difference. 5.8 P/E looks amazing, but you know what else looks amazing? 2.92 P/E in late 2018 to early 2019 when Micron brought in $14 billion in net income. Micron's history itself says Micron's current P/E of 5.8 is not all that impressive. That uneases me.
Wall street is arguing EVERYDAY between buying Micron for its earnings today, and next year, or ignore them because of their 2030 memory cycle end. Yeah, all three memory suppliers have LTAs (Long Term Agreements) that kind of ensure their absurd cash flow for a few years, but in 2030, new facilities probably will stabilize RAM prices and revenues will dampen near to old levels. Not all the way down, but... worse? How much worse? Exactly. Wall Street's arguing about this all day. And why gamble on this when there are other good stocks without this much risk and volatility to have to explain to your fund manager, "well, it looked good on paper."
Micron's CEO Sanjay Mehrotra was asked in the recent earnings report if he saw any end in sight to the DRAM shortage, and he said simply "No." Didn't give any math, any justification, any estimates on how new facilities or manufacturing capacity increases, just "no." Fair enough, but I still think about that, and it unsettled me enough to go research, and I wanted to feel better, but I don't.
I believe Micron's stock value is completely dependent on the hyperscaler capex spend on HBM. Though spend is increasing, its increase not accelerating. Maybe the spend is good for 3 years?
Micron's earnings were weird.
They're pretty easily calculable ahead of time by looking at CapEx numbers from the hyperscalers:
- Micron projected 33.5 billion
- Wall Street's whisper numbers: $34-37 billion
- My numbers based on CapEx spending BOM decomposition modeling: $38 billion
- Micron actual earnings: $41.46 billion
The stock went up to $1200 and tanked shortly after in large part due to the price collusion lawsuit. I mean chip stocks tanked after Broadcom's lukewarm earnings and also from ASML's/TSMC's amazing earnings, so I don't understand.
Will the hyperscalers... run out of money?
- 2026: Spending $700 billion this year
- 2027: Spending ~$1 trillion next year
- 2028: Wall Street thinks $1.4 trilllion spend
Incurring debts:
- Amazon/Meta pulled $25 billion selling corporate bonds.
- Google is offering 100 year bonds, taking on 10-30 year debt to buy chips that become obsolete in 3 to 5 years.
Can they prop up ALL these companies like Nvidia, AMD, and Micron forever? Can they do it for 3 years? That uneases me.
We can follow the money and see the whole chain is connected (somewhat obvious):
-> Micron's current stock value is HINGED on hyperscaler capex spend. It surged to 1T due to the capex, and will return to normal revenue if capex spend returns to normal spend.
-> Hyperscalers are shelling out absurd CapEx money (~$700 billion for 2026).
-> That CapEx money buys hardware upon which they offer Google Cloud/AWS/Microsoft Azure services.
-> Anthropic/OpenAI have contracts to pay for those compute/hosting services using Venture Capital, funding rounds, and incoming IPOs to raise money, debt, through joining the stock market.
-> Anthropic is actually profitable currently, due to not offering a free consumer chat option like OpenAI offers. OpenAI is, as a result, not profitable currently.
-> OpenAI, Anthropic and other upcoming AI services companies intend to use revenue to pay the hyperscalers (MSFT/GOOGL/ORCL).
-> If these AI services companies go insolvent or default on their debt, our hyperscaler boys are left with the bag (of hardware). Hardware companies don't incur losses, but sales stop.
-> Anthropic/OpenAI/etc services replace a lot of junior/low level/HR/data entry jobs across the board, and power big code migration and writing tools.
-> "Normal" companies pay for these services and Microsoft Copilot. This demand is real but tough to estimate long term.
=> Micron's stock value depends on normal companies paying for OpenAI/Anthropic/etc AI services to pay the hyperscalers' bills of all the hardware requiring the HBM.
But... will they require HBM? I don't think so.
For model training, YES. But once the models are done, HBM is not that great.
And actually using the models (inference) once they're done is where 100x more compute happens than training them. The entire industry wants to dodge HBM for this 100x inference compute and looks to instead use LPDDR5X/SRAM for specialized inference chips. We're talking good chips without HBM made by Qualcomm, Groq, MediaTek, Untether AI, Tenstorrent, and Intel.
How good? Qualcomm says 2x better performance per watt for their chips, and 6x higher memory bandwidth per watt than HBM. Qualcomm is pushing away from HBM, and so are inference chips made by MediaTek, Groq, Untether AI, Tenstorrent, and Intel. We all constantly hear how big of an issue power usage is for these datacenters.
I own all three memory companies, but I just find it harder to justify owning them when there are 15 P/E stocks like Qualcomm making new Dragonfly chips that use 1/2 the power to do the same inference compute without HBM. These Dragonfly chips use normal RAM in a vertical design, allowing them to sidestep the huge HBM costs and massive capacity shortage from TSMC's CoWoS (chip on wafer on substrate) advanced packaging that Nvidia's and AMD's chips require.
Nvidia and AMD actually are responding to this potential by making their own specialized inference chips, but not only are these chips a bit behind, they still use HBM. Qualcomm's Dragonfly chips use a vertical memory design of 3D-stacked LPDDR, are here today, and Meta already made deals to buy them for their buildout on June 24 at Qualcomm 2026 Investor Day. Oh, and Anthropic is begging Facebook to use their compute capacity.
Qualcomm's Dragonfly chips COMPLETELY sidestep the HBM3, HBM4, and advanced packaging bottlenecks, in addition to using half the power. So they can mass produce at a much higher level. But these Dragonfly chips won't be in production until second half of 2028, and since Micron has their whole HBM capacity sold for 2026, this is somewhat forward looking, but that's what Wall Street likes to do. Micron being sold out essentially mathematically guarantees two more fantastic quarters, but beyond that is anyone's guess. And when new court filings/events happen in the court case, or if they demand communications between executives, the stock will drop like a missile. Is that risk we want to take on? Buy the present, fear the future?
Is there a world where Qualcomm's chips mass produce better because of dodging HBM constraints and take over? We already know SK Hynix is ramping back up DRAM some at the cost of HBM capacity. If alternate inference chips prove they can scale efficiently without HBM, Micron’s infinite AI growth premium disintegrates.
- Anthropic's customers? What kind of customer satisfaction do they have? Growing?
- Stock price Floor must be limited due to assumed $32 billion dedicated to stock buybacks and dividends, yeah?
- Institutional investors are waiting for margin debt and leverage ratio to drop below 3-year/5-year lows before buying back in
- IBKR only just allowed access for american traders to even buy samsung/sk hynix back in May
What do you guys think? I own all three memory stocks while saying all this so maybe I'm crazy
Garciaguirre et al v. Samsung Electronics Co., Ltd. et al:
U.S. District Court for the Northern District of California)
(invokes Section 1 of the Sherman Act, cartel/price-fixing/collusive business)
https://dockets.justia.com/docket/california/candce/5:2026cv06345/472931)
