Micron’s Rally - The Market Signal

[00:00:00]Hey guys, welcome back to Market Signal.

[00:00:01]Well, we did it. We strung two strong days together, especially today. Today was an outstanding day for the memory sector, for the memory titans, the Fab Five we call them. I mentioned last night that I wasn't quite ready to say we are back yet. I'm still not sure if I'm quite ready. I still probably want to see another day because we have some major catalysts happening tomorrow that could move the sector one way or another. But it was a nice day today because we have seen for the last couple weeks a relentless downward pressure across the across all semiconductor equities quite frankly. But the tech sector, the memory sector have been hit hard. Today it delivered a violent double-digit bounceback. We saw Micron, Sandis, Western Digital, uh SKH Highix as well as Seagate all respond in double digits today. It was a significant move for the memory and the storage players across the market. And if you've been tracking this sector and the headlines in this sector like we have been on this channel that you know that the noise on this sector just has been deafening across the board. There has been so much anxiety, panic and just flatout noise driving across the sector. So today was a nice day for us. It was something probably that each and every one of us just let out a collective kind of breath of relief to see that we strung two strong days together. The sector was moving again in the right direction. It all started last night. I put out this community post last night. You might have seen it. It was late. It was about 11:00 my time. I was starting to see significant momentum in the Asian markets. We are seeing the after hours for the US players just to rally as well. And I said there was three things that I think were driving it. Number one, I think the upcoming SKH Heinix, the earnings that we're going to see on July 29th is driving strong sentiment in the market right now. I think investors are preparing for the commentary that we're going to hear on HPM, on DRAM, as well as the constraints that we see in the market. What will SKH Heinik's leadership team mention around the supply constraints and how long they think they will last? The second piece was the momentum that we saw in the Asian markets. The KOSPI was on fire.

[00:02:09]The Nikk225 was on fire. Kio was up 16%.

[00:02:13]Samsung, SKH Heinix overnight were up significantly. I mentioned we were going to see some momentum buying and some short coverages here in the US that was going to drive upward pressure for the stocks. It's exactly what happened. And then the last thing I was looking at was just if we could hold Micron's level above 900 like we were seeing in the pre-market running up to the open bell.

[00:02:34]if we could maintain that and go into the level I thought that we would see elevated uh volume across the entire AI hardware stack and we did. So it was nice to see all of them come together and drive strong sentiment for the sector overall. But that wasn't it. I want to talk today about some signals that we're seeing in the market right now. And I actually have a little bit of a different structural framework for this video. So you'll have to make sure if you give me some feedback at the end if you like this type of setup. But before we jump into that, make sure you hit like. Make sure you subscribe to the channel, guys. Like I mentioned last night, we still have about 50% of our viewers that absorb this content that love this channel, but haven't subscribed. So, do me a favor. Just take a moment and hit subscribe if you haven't joined the Market Signal community already. We want you here. We want to be able to engage with each other, learn from each other, and ultimately help each other grow our portfolios. So, let's jump into the video. Let me show you the structural setup for today's video. I want to I'm calling it kind of the the market signal shocker there, branding the the uh channel's name, but you can see I want to discuss signals that we saw today, whether they are green, which is something that strengthened our long-term thesis on this channel, or they were yellow. So, it's it's a signal or a story, something that needs further monitoring that we'll have to observe and watch over time because it's too early yet to tell how we'll alter our thesis in a bearish or a bullish manner.

[00:03:58]And then finally, a red signal that came out today. What was the near what is a near-term event or a risk that could invalidate or challenge today's optimism or challenge the thesis overall? So, that's what I want to focus on in today's video, covering those signals.

[00:04:14]But before we do that, I want to jump in and just take a look at the performance that we saw today. Real quickly, I want to cover the sector go around the horn because Micron, I mean, guys, it just it deserves it for the performance that we saw today. need to stop for a moment and just look exactly the momentum that was caused across this sector. Micron almost closed at 970 a share, $104 a share, up over 12% today. In the after hours, we're continuing to see further rally.

[00:04:41]The stock is about 980 right now. In all honesty, it's coming back down a little bit. It was about 992 maybe an hour ago or so. So, we'll keep our eye on that, but it's still positive. another 1% another 11.5 dollars growth right now we're seeing from Micron but let's just take a look quickly at the other players SanDisk I'll pull it up strong day today over 14% growth almost a $200 gain for the stock closed at$1589 in the after hours we're seeing another just over two and a quarter percent another $36 up at about$1626 right now Western Digital the storage kings did a great job today 60 to $61 gain today 12.5% % closed at 548 pushing right now 554 in the after hours another 1% up another $5.71 strong performance for this storage king Seagate didn't want to be left behind today picked up $89 on the share but in the after hours it's up another $4 getting close to that 900 level it was over 900 about an hour ago came back a few dollars but strong performance 11% on the day we're getting close to passing that 900 barrier or that threshold again for Seagate. And I don't want to leave the newest member of the group out. Let's take a look at the ADR.

[00:05:59]SKH Heinix had a solid day today. It was up almost, you know, 13 and 3/4% almost $21 gain on the board. The stock closed close to or the ADR closed close to $172 per ADR. After hours picking up another $2 almost a $1.76. It's sitting right now just just close to about 174 per 80R. So strong day across the sector.

[00:06:24]Like I said in the beginning, this was an awesome day to see. There was so many people on the channel that are just saying that the stock the bears that we were going back and forth with in the commentary that we were going to be at 400 today. No, 500. The stock is broken.

[00:06:38]It's going to be at 600 today. I just didn't believe it as I said last night.

[00:06:41]So today was a great day for all of us that have had conviction to see the stock moving the way we have. Let's see if we can continue to to string together three days in a row and then maybe I'll really start to believe that we're back, especially if we can get over that psychological level of a thousand again.

[00:06:58]But let's jump over and take real quickly take a look at the candle chart.

[00:07:01]You can see the gap up that we had. See where we ended on Monday and where we ended on uh t where we started on Tuesday. Really nice right out of the gate. Couple strong candles, a little bit of pullback. My thinking here is we probably had some profit taking. The stock's been under significant amount of pressure. We saw this this bolus of activity right at the opening bell or gapping up right at the opening bell. We saw the momentum building in the pre-market. I think people just had some hit the sell button right out of the gate to get some money out of this stock. But it's a shame that they did because I hope it wasn't retail investors giving cheap shares to institutions because look at the conviction that happened right after that. This is a strong kind of just a vertical staircase. Drove all the way up to the stock today to the high of 18, excuse me, 983 a share. We saw a little bit of sideways digestion in the afternoon. A little bit of rally to finish off the day. Strong volume in the morning. We see these massive pillars.

[00:07:57]But the other thing I want to take away today is look at the RSI below.

[00:08:01]Perfectly neutral. It's sitting at 50 right now. Despite the run that we saw today with Micron, it is not overbought.

[00:08:08]It is sitting in a perfectly neutral position. It is coiled. It is ready for the next leg up. Let's hope that's tomorrow. Let's hope we break the thousand barri tomorrow and we keep moving with the stock. Let's jump into the signals that we saw today. I want to go through these real quick on what drove momentum. So, two big things that drove momentum today were stories that we talked about yesterday. I think the market is finally realizing it as well and it drove kind of the explosive action that we saw today or some of the reasons. But this is all around. It's from Britney Win. Investors that thought the Chinese AI was a threat are now realizing that it's turning into a major catalyst for chip stocks. If we scroll down, chip stocks are hot again as investors come around to the idea that something once viewed as a threat to AI trade might actually be a further spark.

[00:08:55]It's what we talked about in last night in the video. Sometimes we just need to slow down in this sector to absorb the stories and not just immediately react with emotions and and anxiety and think that something is going to be troubling for the sector. Every time we've done that, whether it's Turbo Quant, whether it's CXMT, whether it's now in this example, Kimmy K3, we realize that the reaction was an overreaction that they actually turned out to be a strong catalyst for the memory sector. They're not a negative flag at all. And that's what we're seeing right here. As well as we scroll down, we can see that, you know, Zach's investment, Zach's investment management group said that chip stock valuations have reached the point where you can once again get involved and participate in the upside potential. Bank of America, they feel that the release of this open- source model supports the bullish thesis on memory and on memory stock. Um and then finally, as Chinese models have been able to reduce compute intensity using different techniques for efficiencies, the models still require the same or more memory as the model weights as model weights and active parameters increase.

[00:10:02]Another piece down here that I wanted to talk about was CXMT because that their IPO was another one was driving fear in the sector. Basically guys, at the end of the day, CXMT is not going to participate or compete, let's say, in HPM. they are more geared to the kind of lower-end consumer commodity products that DDR4 the DRAM products overall and um as they mention here you can see unlike Micron SKhix and Samsung the worldleading producer of D of DM CXMT does not focus on high bandwidth memory which is in high demand from AI chip makers like Nvidia the Chinese plus the Chinese company's ability to serve the market remains the US market remains unclear I jump over this article that I also saw on investing.com Again, it validates what we're talking about. But there's a few things that I wanted to call out here. Bank of America attributed the pricing advantage that we see with Chinese models. They attributed largely to architectural efficiency techniques, lower Chinese efficiency, labor, and land costs, and ultimately state linked capital subsidies from from the Chinese government, which is able to keep those prices down a bit. But on competition, Bank of America believes that China's CXMT is not a threat to AI memory. It is primarily addresses the it primarily addresses the underserved consumer commodity DRAM market, not the HBM market. So those are the the green signals for today. Let's take a look at the yellow ones, the ones we have to keep our eye on. This one more so for compute, but I only reason I pull it in is because of all the fear that we saw with when Google announced TurboQuant.

[00:11:36]So they did announce a new kind of model that they're exploring called frozen v2.

[00:11:41]It's their frozen version two which is explores a kind of different setup with Gemini to get efficiencies in in all actuality it is more of a kind of front against GPUs not memory but I pulled it in because just of all the fears that we saw with Turbo Quan when Turboquin drove down stock prices for like a week until people realized wait it's actually a good thing for memory. If we get more efficient we'll see more uses. It's the Jevans paradox. It will drive more uses of memory. So, this is something I want to keep our eye on as well because as Google's reportedly developing a new chip that embeds information from Gemini AI models directly onto the silicon to boost efficiency. It's nicknamed frozen uh V2 and is meant to resolve AI compute shortages that have constrained Google's cloud business. It is said to be six to 10 times more energy efficient in terms of token consumption than the latest version of Google's AI chips. So we know that embedding more information could increase efficiency in running a given model. But there is some downsides to frozen v2 because it it's less flexible with running with other models including Google's own models. if they own if they update or have any architecture changes to their own models, they'll have challenges with this with this frozen v2 architecture as well. But Google, we know they already produce their own chips specialized for AI inference tasks. They are TPUs that we know the frozen chips are geared more towards running Gemini models with maximum efficiency and in sense they're not in that sense they're not meant to replace the TPUs. They're designed and the TPUs we know are designed to work with many other models. These new chips which could be released in early 2028 in a limited volume batch, they're being treated as an experiment in building highly specialized silicon. So that's something I just want to keep our eye on. Like I said, I don't think it's a threat to memory, but when we what we did see with Turboquant and we know we have Google reporting tomorrow, they may speak to this. It could it could have an impact on share price. So that's why I want to keep my eye on it. The second one was the news that came out on trend force around two major competitors to Micron. Samsung and SKHix reportedly developing new products. So Samsung reportedly targets this year for their CXL, their 3.2 mass production and SKHX advances a new AI memory architecture.

[00:14:05]So let's dig into those stories. Samsung plans to massproduce its CXL memory module DRAM based on the latest CXL 3.2 2 specification by the end of this year.

[00:14:17]Samsung said that their this memory can increase total memory capacity by up to 50% and double memory bandwidth compared with systems using only DDR5 memory. The technology also supports memory pooling allowing multiple servers to dynamically share memory resources as needed. The CX the CXL 3.2 2 specification also introduces a hot page monitoring unit which monitors data access access frequently in real time and intelligently uh places frequently and unfrequently accessed data in the most suitable memory location. So ultimately the goal here is to reduce unnecessary data movement make it more efficient and ultimately improve memory resource utilization overall. So that's what Samsung is exploring to push out this year. SKH Heinix talked about their new inference memory tiering expansion or their IMT. This new architecture, it improves AI uh inference efficiency by 36% over conventional systems by placing CXL hybrid CXL hybrid between HBM DDR5 and the SSD. So this architecture creates a new memory tier that combines multi- terabyte capacity with relatively high performance using a CXL as an intelligent hub to coordinate HBM DDR and SSD through proactive data movement.

[00:15:41]So this shift is starting to gain uh broader support across the ecosystem. We see Nvidia, Intel, AMD, they're all incorporating this CXL memory into their next generation chips. So we'll keep our eye on it. memory. Micron certainly is a player in this space as well. I just wanted to share these two competitive updates that we have to continue to monitor over time. The the Samsung planning to launch this year. SKH Highix is a little further out with their new inference memory architecture. But I love these types of innovation. It just shows you how these players Micron, Samsung, and SKH are not sitting on their laurels. They are continuing to try to innovate and bring new products to the market. Micron's doing it as well. So, it gives us more and more to talk about each and every day, and I love that. But let's jump over to the red signal that I saw today. I want us to keep on keep our eye on, and it's all related essentially to Google's earnings tomorrow after the after the closing bill. As the article says, Alphabet is pouring record cash into data centers and earnings will show whether it's paying off. This is what the market wants to see. You see the subheader here. Investors will be looking for more signs of AI monetization when Google when Google, YouTube, and their parent Alphabet report its earnings. If we scroll down into a few of the details, you see here that Faxet is saying that Alphabet is expected they're expected to report 117 billion in revenue and $287 in earnings per share. On the last call, uh, Alphabet shared that their capex for this year was going to be between 180 and 190 billion. They're expecting the capex for this quarter two, quarter two they're going to report on to be about 45 billion. And they're mentioning here, you can see that the managing partner from from Bluebird Capital that she feels that the capex numbers could be a surprise for the upside all based on the bottleneck in memory and how that is driving up component costs for data center hardware. So that's something we'll have to keep our eye on. Cloud growth remains the key metric though we have to listen to tomorrow. Whether when we're evaluating Alphabet's report because following an an impressive expansion in the first quarter, Wall Street consensus calls for another 63% year-over-year growth in this call in this uh cloud unit. Guys, the red risk for me is twofold with Google's earnings tomorrow. One is we have to keep our eye on kind of capex fatigue and the monetization demand. So if Google signals any moderation or sequential slowdown in its data center infrastructure spend or if that cloud revenue if it's not growing to the rate that the market sees that 63% if it fails to show that enter or if they fail to show that enterprise AI monetization is scaling fast enough to justify these record capex checks investors could trigger a sectorwide profit taking wave and it could impact the memory sector as well could impact Micron. Also, we need to look at with Google expanding their TPU usage and exploring custom silicon, analysts will scrutinize whether hyperscaler capex dollars are translating into third-party merchant hardware purchases or are they being absorbed by internal custom solutions?

[00:18:51]Will the manufacturers continue to get all of this money or are the hyperscalers trying to build these solutions in house? Something we'll have to listen for. So, those are the big signals. If I jump to the scorecard for the day, this market signal scorecard.

[00:19:04]First off, look at that growth in the upper right hand corner. What a great day for the memory titans. But go through what we talked about the green signals today. Obviously, we're seeing the AIC Chinese models as a demand catalyst. They're driving performance for the sector. The HBM moat remains.

[00:19:21]CXMT is not anywhere near HBM. There's not a threat there. They are for the lower-end commodity and consumer DRAM products for now. So, that moat remains.

[00:19:30]And then obviously with the chips act going away, opportunity for long-term capital to return to the market for a stock buyback for Micron could drive upward pressure, positive pressure for the stock. The yellow are all we focused on. You know, the frozen V2, this new kind of uh model for for Google, will it rattle investors? I don't think so, but Turbo Quant did, so I want to keep my eye on it. We're looking at what Samsung and SKH are doing with their new uh architecture overall. We'll keep our eye on that. And I didn't mention the DDR5 spot pricing, but it is hitting record highs today. It reported it's between $190 and $200 for 16 gigabytes of modules. Server demand absorbs 80% of that. But piece I want to call out here and why it's yellow. We have to look to see what type of friction that will have with consumer markets overall. And then finally, the red signal, it's going to be Alphabet's earnings tomorrow. the capex and the monetization test that I talked about. Investors are watching this $45 billion capex in Q2 and the cloud growth. Will it exceed the 63% year-to-year that in that the market expects? Will we be able to say it? Is Google going to be able to justify this record spend with monetization and show the market that if they continue to spend or if they increase their capex that it's all for good reason and it won't rattle investors confidence. And then finally, this shift, this internal chip shift, essentially it's the scrutiny on TPUs and custom silicon versus third-party hardware. Are we going to see the hyperscalers try to develop more internal solutions that could ultimately hurt the margins for players like Micron and others across the AI hardware stack? So guys, that's kind of the takeaway for today. Let me know what you think about the new structure overall, what we saw. Let me know your comments below. Do you like this new setup of green, yellow, and red signals on the day? And then ultimately, let me know what did you do with today's rally that we saw? Are you buying more?

[00:21:27]Are you holding your cash right now, waiting to see the earnings call that we see for Google tomorrow? Are you still a little cautious about kind of entering back into this sector? Let me know down below. And if you haven't done it already, make sure you subscribe to the channel if you like these type of daily institutional breakdowns because that's what we have today. That's the episode of Market Signal. I'll see you guys all tomorrow. We'll see what the tape brings us tomorrow. But have a great night or have a great night or have a great morning wherever you are in the world.