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00:00And right now we are two minutes away from the end of the trading day.
00:03Romain Bostic here to take you through the closing bell.
00:06Katie Greifeld is on assignment with Carol Massa and Tim Senevich.
00:09Join us as always.
00:11Welcome to our audiences across all of our Bloomberg platforms, television, radio,
00:14and our partnership with YouTube.
00:17A very busy afternoon here as we await some earnings out of Micron.
00:20And of course now, just about an hour or so removed from a big Fed decision
00:24that actually didn't move rates, but actually said a lot about where the Fed is at.
00:28Yeah, kind of fascinating.
00:30And I think the big headline is Fed Chair Jay Powell, basically.
00:33I'm not going anywhere.
00:34We're going to wait until all this stuff is resolved.
00:36We just talked with Greg Peters over at PGM.
00:39And some of that saying, you know, here is a Fed chair that is willing to stay put,
00:44not cut rates, do the right thing based on what the economy needs.
00:48And so that kind of helps explain what we are seeing in terms of market reaction.
00:52Stocks under pressure.
00:53And we have, you talked about the yield curve in terms of a flattening,
00:57but we did see certainly yields move up.
01:00Yeah.
01:00And not to sort of belabor the point about what we learned from the plans for Jay Powell,
01:04because I do think that that was a big bit of news that we got, Romain.
01:07Yeah.
01:07I guess the ball kind of moves into the court of Janine Pirro, U.S. attorney for Washington, D.C.,
01:14Senator Tom Tillis with the nomination process and whether or not, you know,
01:19we could see a Fed chair nominating process in the next few months.
01:23Because if we don't, then Jay Powell, he's there.
01:26And it's messy.
01:27And I'm just going to borrow a phrase that John Farrell used on the Fed special here.
01:31The idea of this type of a messy succession plan, if you will, for the most important financial institution in
01:38the world,
01:39no bueno.
01:40No bueno here for the equity markets as well.
01:42We started the day in the red, but they were modest losses to start.
01:46Those losses accelerated once Jay Powell started speaking,
01:49and they accelerated even further when we got closer to the closing bells,
01:52the broadest-based sell-off that we've seen in the S&P 500 all year long.
01:57Down 91 points on the day or 1.4 percent.
02:00The Dow Jones Industrial Average losing 770 points or 1.6 percent.
02:04The Nasdaq Composite down about 1.5 percent.
02:07And the Russell 2000 giving up about 41 points or 1.6 percent.
02:11All right, back to the S&P 500.
02:12No surprise, as we see stocks selling off here following the Fed decision.
02:17Romain, we've got most names in the S&P lower today.
02:20420, 22 to the downside, 81 actually gaining ground on this Fed Wednesday.
02:28So, yeah, a lot of selling here.
02:29And all 11 sectors in the S&P 500 are in the red.
02:33Consumer staples and discretionary stocks, the biggest decliners there.
02:37But, honestly, nothing was spared.
02:38And that even includes energy.
02:40That was actually fractionally lower on the day.
02:42We should point out that as we speak right now, we are seeing the Brent crude prices climb back
02:47to those intraday highs around $109 a barrel and yields right now on your two-year,
02:52the highest that they've been since August.
02:54All right, everybody, we've got Micron crossing the Bloomberg terminal, so let's go to it as they cross.
02:59Bringing up my headlines here on the Bloomberg, second quarter adjusted revenue.
03:03Folks, pretty big beat there.
03:05$23.86 billion.
03:07Street estimate was $19.74 billion.
03:10Check out the second quarter adjusted gross margin.
03:14Investors were expecting a lot, and they're getting it.
03:1674.9% on that adjusted gross margin.
03:19Estimate was 69.1%.
03:22Second quarter cash flow from operations, $11.9 billion.
03:26That compares with an estimate of $8.93 billion.
03:29I'm sorry, can I just stop you there?
03:31Yeah.
03:31Because I know you're comparing it to the estimates.
03:32But I just want to compare that year over year.
03:34$11.9 billion in cash flow from operations.
03:38A year ago, that was $3.94 billion.
03:42And similar story in revenue, $23, $24 billion in revenue.
03:45A year ago, that was $8 billion, Carol.
03:48Well, get ready to pop your eyes even more, because third quarter adjusted revenue, here's the outlook.
03:52Revenue of $32.75 billion, folks, to $34.25 billion.
03:57Street estimate was $23.66 billion.
04:01Stock up about 2% here, Tim.
04:02Look, Sanjay Mehrotra, president and CEO of the company, says this is economics 101.
04:06It is all about supply and demand, Romain.
04:09He said, Micron set new records across revenue, gross margin, EPS, and free cash flow, driven by a strong demand
04:16environment, tight industry supply, and our strong execution.
04:20In the AI era, memory has become a strategic asset for our customers, and we are investing in our global
04:25manufacturing footprint to support their growing demand.
04:28I don't know if you read the revenue projections yet, Carol.
04:31So forgive me if I repeat this here.
04:33It's worth repeating.
04:34Adjusted revenue numbers, that 32.75 to 34.25, and that's above estimates.
04:39But you mentioned the stock move here.
04:43I just want to put this into perspective.
04:44You have a more than doubling in revenue in the most recent quarter, guidance that that's going to even grow,
04:50what, you know, 50, 60-plus percent more for the next quarter, and the stock is only up nine-tenths
04:57of a percent.
04:58Yeah, it is kind of bouncing around here.
05:00So what are they looking for, right?
05:01I think one of the things that investors, analysts, wanted to know, it had to do with pricing and whether
05:08or not what we're seeing and whether that continues.
05:10And this certainly plays into margins.
05:12That's probably why their margins are kind of off the chart.
05:15But we've got to get a little bit more clarity on that because that is certainly something that investors want
05:19to know.
05:19I guess what I'm getting at was all this pricing.
05:21I mean, this is a stock that was up coming in today, like 390 percent over the last 12 months,
05:26I think 65 percent, just to start the year alone.
05:29And the question is sort of what's the bar?
05:30We saw this similar with NVIDIA when it started giving those forecasts the other day.
05:34And, you know, investors are kind of like, OK, yeah, a trillion dollars in revenue.
05:37That's nice.
05:38But, you know, what else you got?
05:39Yeah.
05:39And look, I think to your point, I mean, given that NVIDIA is 17 percent of Micron's revenue, according to
05:44the supply chain function on the Bloomberg Terminal,
05:46then maybe some of this was priced in because you get visibility through other companies and what other companies are
05:51selling.
05:52Absolutely.
05:52And we talk about this idea of just this shift now away from the building of these large language models
05:58to this inference phase that Jensen Wong talked a lot about.
06:02And, of course, it's these memory chips, particularly these dynamic random access memory chips that Micron specializes in.
06:07And it could be a big beneficiary of that.
06:09But also, I'm curious to see what they have to say on the call.
06:12Because, remember, last quarter the issue they had was the demand's there, but they don't have the capacity to actually
06:17build this stuff yet.
06:18And there's a lot of questions as to how you meet that demand and whether they can do it in
06:22a fast enough time.
06:22Well, they said that, remember, they said they're investing in our global manufacturing footprint to support their growth demand, reflecting
06:28confidence in the sustained growth of our business.
06:30This is another headline that's crossing.
06:31Our board has approved a 30 percent increase in our quarterly dividend.
06:34But I think a lot of analysts, to your point, Romain, on the call will be asking, OK, how long
06:38does that manufacturing, global manufacturing expansion, how long does that take?
06:45How long until you can actually build enough to get demand or to satisfy the demand?
06:50But then also, where will we be in the cycle at that point?
06:53That's the challenging part.
06:53Well, that's a good question.
06:54I think BI was that thing that they're apparently trying to build out there in New York State.
06:58The idea is that maybe 2028 would be that.
07:01And we're talking about a business that historically has been highly cyclical.
07:04And I know we're kind of not in a cyclical phase now.
07:06It's more of a structural phase.
07:08But to your point, what is the market going to be like in late 2027, 2028 if they do start
07:14to bring additional manufacturing on?
07:16All right.
07:16I just want to go to Dina Bass actually posting a story on the Bloomberg.
07:19So she says Micron offering a positive forecast for the current quarter after surging prices for computer memory chips bolstered
07:25its prospects.
07:26She got to that fiscal third quarter revenue being approximately $33.5 billion.
07:30Profit will be $19.15 a share compared with analysts' projections of $23.7 billion in terms of revenue for
07:38the third quarter and $11.29 a share for profit for the third quarter.
07:43But again, she goes to memory prices.
07:45She says they're soaring because of shortages filled by AI computing demand.
07:48And the global shortage is likely to persist another four to five years due to constraints in semiconductor production.
07:54Folks, this is basically supply and demand.
07:56When there's not enough supply out there and there's a lot of demand persisting there, prices go up, margins go
08:03up.
08:03It makes these companies much more profitable.
08:05But at some point, though, doesn't that begin to work against them, Carol?
08:08Isn't that kind of the problem?
08:09At some point, people are going to be like, we can't afford this.
08:11And let's face it, I mean, to kind of circle this back to the Fed as well.
08:14And, of course, what's been going on in the Middle East, there's been a lot of discussions about how we
08:18could actually see more upward pressure on prices
08:20because of the disruption of a lot of the key chemicals and supplies you need to make this stuff.
08:24I think you bring up a good point about potential disruptions.
08:26But if we play this through and talk about, again, NVIDIA being its biggest customer, NVIDIA has a lot of
08:32pricing power right now
08:34because there really is nobody else that can produce a lot of what NVIDIA produces and sells.
08:39So as long as NVIDIA continues to have that moat and can control prices and say, okay, well, this is
08:46what –
08:46I mean, look at NVIDIA's margins.
08:48Until those take a hit, then maybe Micron can keep increasing prices because NVIDIA passes those along to –
08:55I would just say –
08:56Yeah, because NVIDIA passes those along to customers.
08:58I mean, their biggest customers, NVIDIA, Lenovo, Microsoft, Dell, Apple, Amazon, I'm guessing these guys have the money to do
09:04it.
09:04Like, they keep tapping, we know, the debt markets and so on and so forth.
09:07I have not seen any of them say we can't afford to actually spend on this.
09:10I don't disagree with you, Romain.
09:11At some point, you know, you do wonder when does this start to slow down.
09:15But at this point, everybody seems to indicate that the demand is still there.
09:18Yeah, look, I mean, the money's there.
09:20The question is when does it stop being a wise use of the money?
09:23I'm really curious to see what they say on the conference call, which is what – I think it's going
09:27to be at 5.30 p.m. East Coast time today
09:30and whether they can kind of articulate a little bit more about the buildout, potential manufacturing buildout,
09:35but also how long they think this cycle could potentially be.
09:39And on that, Dina Bass just saying in the AI market, Micron is working to ramp up production of new
09:43high-bandwidth memory, or HBM4.
09:45And she says and writes and reports, a big question is how much NVIDIA will rely on Micron for that
09:50component.
09:51And that's where it kind of also gets a little tricky.
09:53Okay.
09:53Okay.
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