00:00We're taking a look at shares of Micron, about 5% higher in the after hours, following results from the chip maker.
00:06Joining us now is Jake Silverman of Bloomberg Intelligence. He covers semis.
00:10So, Jake, let's talk about the guidance, because second quarter revenue expected between $18.3 billion to $19.1 billion.
00:18The estimate had been for $14.4 billion, a similar beat when it comes to expectations for adjusted EPS.
00:25This was a company that a lot of analysts had expected to be conservative with their guidance.
00:31This does not look conservative.
00:33No, absolutely not.
00:34No, it really does seem to, if you look at the gross margin guidance as well, which at midpoint was 68%,
00:40really just implies such incredible pricing strength that they have right now.
00:44And it really comes down to supply and demand.
00:47And for the most part, there's just been a real supply limitation.
00:50All of that, for the most part, driven, well, for the most part, driven by AI.
00:55Also, there's been strong demand for PCs, smartphones, but the real story has been AI demand.
01:01I am curious, though, how long this keeps going.
01:04I mean, I hate to look at gift force in the mouth, but at some point, this isn't normal.
01:07It's going to revert to the mean in theory, right?
01:09Or maybe not.
01:10I mean, you tell me.
01:11Is there that much sort of continued demand for these types of memory chips, particularly in the AI data center space going forward?
01:17Yeah, so we're getting past historical precedent, to your point, really.
01:20I mean, in the past, we've seen up cycles tend to last somewhere around 10 quarters.
01:25The average is a little bit lower than that, actually, about two years.
01:27And so we're definitely extending beyond what we would typically see.
01:32And there's definitely question marks about the sustainability of that cycle.
01:35But high bandwidth memory is very, demand for that is very strong.
01:39It's constraining supply for traditional memory.
01:41And the guidance implies that the margins for traditional memory at this point might be higher than HBM.
01:47And so there's definitely a question about, you know, what do they decide to do, the memory makers decide to do in terms of capacity at this point?
01:55And how does that impact the supply and demand balance?
01:58Well, speaking about supply and demand, one of the big questions coming into this report was when we were going to see pricing trends start to moderate here.
02:06Does it follow, you know, we're talking about constrained supply, that these price increases can continue at this pace?
02:12I don't think that the pricing can increase at the same pace that we've been seeing, but it's also been incredibly strong.
02:18And so any sort of deceleration is probably, I think, somewhat realistic and also not necessarily something that would be a detriment to the sentiment of the stock itself.
02:29But partially because if you keep increasing prices at this point, a lot of customers like consumer products, PCs, smartphones are just going to pretty much stop purchasing.
02:40There is an elasticity element to demand for memory.
02:44All right.
02:45And just real quickly, this might be a dumb question.
02:47How often do you have to sort of buy these memory chips?
02:49I mean, is there like a lifespan where they have to refresh or do these last longer than sort of the, you know, like the NVIDIA type chips that they use for the main stuff?
02:57Yeah, for high bandwidth memory specifically.
02:59Yeah.
02:59So these contracts tend to get negotiated around several quarters ahead of procurement and they tend to last about a year.
03:06And so then they get renegotiated over time.
03:08It can depend a little bit on the customer or the supplier, but I guess that's probably a good rule of thumb.
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