Is it Too Late to Buy the Memory Cycle? Micron Stock Valuation

Key takeaways

High Bandwidth Memory (HBM) is an essential component for the AI data center growth.
Micron is expected to experience substantial growth in their cash flow and capacity expansions through 2026 and 2027.
Investors need to consider the cyclical nature of the memory market and the impact of capital expenditures on valuation.
Micron's current stock valuation could reflect promising future profits, but continued demand is crucial for sustaining growth.

Summary

The Memory Trade & HBM's Role in AI

The podcast begins by highlighting the growing importance of memory in the AI data center era, particularly focusing on High Bandwidth Memory (HBM). The hosts discuss how HBM is critical for AI applications and how Micron is ramping up production amidst rumors regarding their supply chain with Nvidia.

Micron's Growth Trajectory

The discussion shifts to Micron's expected growth, projecting significant revenue increases in FY 2026 and FY 2027 due to rising demand for memory chips. The hosts outline Micron's capacity plans, emphasizing that the current capacity is sold out and forecasting a similar trend for the upcoming years.

Capital Expenditures & Memory Market Dynamics

A key theme emerges around the cyclical nature of the memory business, with significant capital expenditures (CapEx) expected to grow as Micron invests in new fabs and technology. The hosts analyze how these capital investments will impact free cash flow and overall valuation as demand remains high.

Valuation Considerations and Market Outlook

Towards the end of the episode, the hosts discuss Micron's current valuation, navigating through potential risks and benefits of their growth assumptions. They present estimates for free cash flow in 2026 and 2027, ultimately suggesting that the memory trade remains robust, but uncertainties persist.

Show notes

As we gear up for Nvidia earnings, the conversation in the AI data center era has shifted toward one critical ingredient: Memory. In this video we are discussing the "memory trade" and why High Bandwidth Memory (HBM) is causing such a shift in the market.

In this video, we break down Micron’s (MU) aggressive production ramp and debunk the rumors surrounding their place in Nvidia’s supply chain.

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Chapters:00:00 – The Memory Trade & Nvidia Anticipation 00:45 – HBM: The Essential AI Ingredient 01:45 – Addressing the Nvidia Supply Chain Rumors 02:30 – Is Memory a Commodity? The Cyclical Risk 03:15 – Calculating Free Cash Flow (FCF) 04:00 – Demand vs. Supply: Why Prices are Rising 05:00 – The Global Fab Expansion: Idaho, NY, & Beyond 06:15 – The $150 Billion CapEx Assumption 07:20 – Micron Valuation: 2026 & 2027 Forecasts 08:00 – Final Thoughts: Still Going Strong?

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Content in this video is for general information or entertainment only and is not specific or individual investment advice. Forecasts and information presented may not develop as predicted and there is no guarantee any strategies presented will be successful. All investing involves risk, and you could lose some or all of your principal.
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Nick and Kasey own shares of Micron