00:00Yeah, I think it's just the monster outlook for the current period, the fiscal fourth quarter.
00:06You know, it's so interesting to see the rising tides of the rest of the memory and storage market,
00:11and you're right to refer to what happened in Korea.
00:13But there is a big distinction in what's happening, which is, you know, it's very high HBM-focused.
00:20It's very much their cloud business, which basically is the traditional hyperscalers and AI infrastructure players,
00:26and also the core data center business, which is much more sort of like uniform CPU-based server.
00:31The demand is very broad-based.
00:34And, you know, beyond that, I think Tim did a really good job to point out the 86% margin.
00:40You know, historically, and this is where Jake's going to come back, because I think he agrees with me,
00:44but historically, like, the memory makers have struggled to maintain margins,
00:48or at least continue to expand margins infinitely in cycles.
00:5386% is like software margins, right?
00:56And they have pricing power right now.
00:58All of that is so evident from the numbers.
01:00I was just going to say that, Ed.
01:01I mean, you don't think about this in the memory space.
01:03Margins, like, sustainable margins at more than 85%.
01:07Jake, come on in here.
01:09How sustainable are margins of 86%?
01:11Yeah, I pretty much agree with Ed.
01:13I mean, if you look past prior cycles, margins peaked around 60 or so percent.
01:19I mean, I think it just emphasizes the level of demand that we're seeing,
01:23some structural differences in the market.
01:25How sustainable is it?
01:28You know, look, are we going to see software margins for the next couple years?
01:32I don't know.
01:33I think that's probably the biggest question.
01:35Well, that's more of a question about the cycle than it is about Micron's product?
01:38Yeah, it's more of a question about the cycle, because it's the sustainability of the pricing model.
01:42Because if pricing declines even a little bit, that's going to immediately hit gross margins.
01:45Jake, what does it offer that SK Hynix or Samsung don't necessarily offer?
01:51Like, what is its niche?
01:53I mean, I think generally speaking, Micron has talked about having lower power in their HBM, their high bandwidth memory.
01:59But the thing is, it's very difficult to determine which companies actually have, like, structural advantages in terms of their
02:06technologies and their roadmaps.
02:07In the past, Samsung has really benefited from having more scale, more capacity in their manufacturing.
02:14And so Micron has a little bit less manufacturing capacity than the other two that you mentioned.
02:19But, you know, generally speaking, they have competitive products, and so they're able to win designs, especially in HBM, where
02:26there's just tremendous accelerating demand.
02:28I am thinking a lot about the semiconductor cycle.
02:31We do see the chairman, president, and CEO of Micron, Sanjay Maharotra, saying Micron is investing at record levels in
02:37technology products and supply to address our customers' rapidly growing demand.
02:40You know, Ed Ludlow, you know this, and we talk with our Ian King a lot about the semiconductor cycles.
02:46Dare I say this time is different?
02:48No, I think we talked with Mandeep saying, you know, companies, chip companies are going to be careful.
02:54They remember when these things blow up or when these cycles and the overbuild and then what happens.
02:59So are we going to continue to see kind of high pricing because they're going to be very careful and
03:05measured when it comes to the build out?
03:07Yeah, I mean, the textbooks would tell you that memory in particular is boom and bust, right?
03:12It is cyclical.
03:12But what we're seeing in Micron's numbers is highly analogous with NVIDIA's experience between 2022 and 2025.
03:19You have to remind yourself what were its revenues one year ago, right?
03:24So they're guiding right now for $50 billion in the fiscal for plus or minus a billion, I think, right?
03:29So somewhere in the middle is like 49.
03:31You know, in the same period one year ago, revenue was like $3.4 billion on its cloud division.
03:38It's now $13.5 or whatever it comes in at.
03:41It's just growing at a tremendous rate.
03:43What the market's taking confidence with is the commentary that this demand is accelerating.
03:50It has staying power.
03:51It is reflective of a future, not just the present.
03:54So, Ed, I want to home in on that.
03:56I mean, you talk to the executives of the companies that are buying from Micron every day.
04:02I mean, we're talking Dell, NVIDIA, Lenovo, Microsoft, Amazon, Apple, and the like.
04:08Like, to Jake's point about margins right now and it being a commentary on the cycle in terms of sustainability,
04:16where do you think we are in the cycle based on what Micron has said about its outlook
04:22and the brief comments that we got from Eurotra in that press release?
04:26Well, demand is always relative to supply.
04:29And, you know, what is very evident from the scenario outlined in the numbers is pricing power that Micron has.
04:37It will be really interesting if on the sell side during the analyst call,
04:42they ask if those higher projections on revenues are based on units because more supplies coming online
04:49and they're able to sell more goods in very simple terms, or if it's reflective of higher pricing.
04:56You know, revenues can go up if you charge more per unit.
04:59What is still true is that memory, specifically high bandwidth memory in the AI context is the bottleneck.
05:07DRAM, high bandwidth memory is just layers of DRAM, and there are still competing forces, right?
05:13The smartphone market, the PC market, and then the data center market.
05:18You made the observation with the guys on the team at the close that actually in the quarter gone,
05:23there were really significant beats and you went through each division, right?
05:27Well, similar story.
05:28Was there outperformance there because Micron priced higher or because they magically found more DRAM to sell?
05:36Yeah, to that point, Ed, they're not the most important divisions, but I mean, when we're talking beats,
05:39they were like doubling what analysts had projected in some of those categories.
05:43And they're smaller categories, but they were doubling them.
05:47Yeah, but again, the answer's not in the earnings release or the statement from Mirodra.
05:54It's going to come in the call.
05:56And I don't know, like, let Jake weigh in on that.
05:58For me, it's always like on the consumer electronics side, and that's come out very recently with Apple, right?
06:05Apple will raise prices per an interview Cook gave to the Wall Street Journal because of the commodities cost.
06:10Commodities, in this case, also applies to memory.
06:13You're going to hear from the guy that's in charge of a key supply of memory.
06:17And, you know, if they are having to raise prices at the end market, consumer electronics,
06:23does that reflect that the source of supply have decided to raise prices too?
06:29Yeah, no, I mean, I think what Ed's pointing out really is just that because supply is so limited,
06:35you have these fabs, right?
06:37They are mostly at pretty much 100% utilization.
06:40In past cycles, what you've seen is some dark corners of these fabs that don't have tools running wafers.
06:46That doesn't really, that's not really applicable in this cycle.
06:50So basically, these fabs are running at full capacity.
06:54Some of the standard DRAM is being taken offline for high bandwidth memory.
06:58So you're tightening the entire ecosystem for memory, and that's just what's driving this pricing power.
07:04And that's all three players who are acting pretty much the exact same way.
07:08And so when you talk about cycles, we're talking about pricing more so than we're talking about, you know,
07:13bit growth or unit growth, something like that.
07:15I don't really think that what we're seeing in terms of guidance, the beat and the guidance, that's units.
07:21I think the vast majority of that's going to come from pricing.
07:23So, yeah, and I think it makes a really good point, like this whole idea that, right, higher revenues on
07:29its own is just a number.
07:31But if, because when things cost more, that doesn't necessarily mean you're selling more, right?
07:35And that is what you're selling.
07:37If you're selling more, that's an indication of demand.
07:39Is that top for you, too, in the earnings call?
07:42Right now, and I just want to remind everybody, we did see Micron up as much as 11% in
07:46the aftermarket, now about a 9% gate.
07:48So that's pretty hefty.
07:48Yeah, I think the most important thing are going to, the most important things, I would say there's two things.
07:54First of all is supply, you know, what Micron comments in terms of their supply plans.
07:59SK Hynix recently talked about getting to a million wafer starts per month by the end of the decade or
08:04around that time frame.
08:05That means that if Micron wants to maintain their bit share, they're going to have to act in a somewhat
08:09similar manner in terms of their capacity expansions.
08:12The other thing, and that would obviously have an impact on price because it is a little bit more of
08:16a commodity-like market,
08:18even if there are some structural changes compared to prior cycles.
08:21The other thing to think about is these long-term contracts.
08:24You know, we've seen different comments about this anthropic on Monday.
08:30There's talk in the news about three-year contracts from Microsoft for some of these memory supplies.
08:36So the thing to think about is, you know, what's the level of these contracts?
08:40How much is actually allocated?
08:42Are there floor pricing?
08:43Is it variable pricing?
08:45So, you know, how many bits are allocated for this year and next year?
08:48Those are going to be the main questions that investors are going to be asking.
08:52But Micron might not be able to answer them in that level of detail.
08:55How many bits are going to be able to answer them in that level of detail?
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