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Micron Forecast Fails to Satisfy Investors After AI-Fueled Rally · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 2: Right now, we want to go back to our Interactive
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  Speaker 2: Broker studio and bring in one of our very own experts,
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  Speaker 2: and he is, of course the expert on Micron, and
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  Speaker 2: we want to talk about Micron because the stock is
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  Speaker 2: lower today despite a beat and raised quarter. We do
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  Speaker 2: have with us Jake Silverman of Bloomberg Intelligence. He's a
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  Speaker 2: semiconductor analyst, and Jake, I wonder how much of this
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  Speaker 2: disappointing price action today is tied to the fact that
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  Speaker 2: the stock has had a blistering run in twenty twenty five,
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  Speaker 2: more than doubling in value.
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  Speaker 3: Yeah.
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  Speaker 4: No, I think it has a lot to do with
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  Speaker 4: just very high expectations coming into the quarter. You know,
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  Speaker 4: the stock being up ninety five percent year today going
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  Speaker 4: into the report last night just had a lot.
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  Speaker 3: To do with it.
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  Speaker 4: But overall, look, I mean the fundamentals of the business
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  Speaker 4: remained very strong. I think the commentary on the call
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  Speaker 4: last night for management was very positive, and so I
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  Speaker 4: think we're going to continue to see an up cycle
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  Speaker 4: and memory at least for the near term.
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  Speaker 5: So what is the call here, what's the street looking
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  Speaker 5: for for this name? Again, A stock's just as you mentioned,
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  Speaker 5: ripped this year up ninety four percent year today. What's
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  Speaker 5: the call here?
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  Speaker 4: Yeah, No, I mean, I think investors are really looking
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  Speaker 4: at high bandwidth memory, they're looking at AI, they're looking
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  Speaker 4: at data center related revenue. In the last fiscal year,
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  Speaker 4: data center related revenue was fifty to six percent of sales.
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  Speaker 4: So as demand continues for that, we also have to
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  Speaker 4: keep in mind that you know, there's traditional products as
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  Speaker 4: well that are an important part of the business that
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  Speaker 4: includes smartphones and PCs. Investors really want to see continued
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  Speaker 4: pricing strength. And as demand continues to grow for high
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  Speaker 4: bandwidth memory, which is very important for AI, and as
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  Speaker 4: capacity for that shifts over. Sorry, because capacity shifts over
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  Speaker 4: to high bandwidth memory, it can further constrains the supply
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  Speaker 4: because it has lower yields, it has larger die sizes,
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  Speaker 4: so there's only so much capacity industry, and it's shifting
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  Speaker 4: over in favor of AI. And that's just constraining supply
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  Speaker 4: for traditional products, which given the supply and demand, the
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  Speaker 4: importance of supplying demand balancing the industry, it would suggest
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  Speaker 4: that as long as demand for AI continues to grow,
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  Speaker 4: we'll see further pricing increases.
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  Speaker 2: So that's a lot of conditions. I mean, you talk
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  Speaker 2: about memory chips, which Micron is the biggest US maker of.
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  Speaker 2: We know that this business is kind of famous or
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  Speaker 2: infamous really for merging between booms and busts, and that
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  Speaker 2: results in these price wings to compensate for the previous
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  Speaker 2: you know, plethora of chips or diarth of chips. How
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  Speaker 2: does the AI revolution change this dynamic?
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  Speaker 6: Yeah?
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  Speaker 4: No, And as I said before, really I want to
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  Speaker 4: put emphasis on the fact that high bandwid memory demand
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  Speaker 4: can strain the supply for other products, specifically with DRAM.
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  Speaker 4: But DRAM now accounts for about eighty percent of sales
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  Speaker 4: for the company, so it's vastly more important than what
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  Speaker 4: we're seeing in NAND. But the other twenty percent of
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  Speaker 4: sales in NAND, we're also seeing strength for enterprise solid
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  Speaker 4: state drives, which are also important for AI. So yeah, look,
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  Speaker 4: I mean I think historically we've seen cycles up cycles,
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  Speaker 4: tend to last somewhere between seven to ten quarters, but
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  Speaker 4: we're now extending beyond that. I mean, we're looking at,
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  Speaker 4: based on the guidance last night, at least twelve quarters,
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  Speaker 4: and then based on the potential for further increases in pricing,
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  Speaker 4: it could extend all the way through the next fiscal
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  Speaker 4: year at a minimum. So yeah, I mean, really, it's
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  Speaker 4: just kind of an almost unprecedented situation, or at least not
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  Speaker 4: something that we've seen in a very long time, and
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  Speaker 4: it really just comes from structural tailments from AI, both
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  Speaker 4: on demand, which is improving pricing via different products like
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  Speaker 4: high bandwith memory, but also just because like I said before,
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  Speaker 4: it's just constraining overall supply, and that's not just unique
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  Speaker 4: to Micron, that's true for both ESK, Heinex, and Samsung
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  Speaker 4: as well, and the three of them account for the
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  Speaker 4: vast majority of DRAM demand in the industry and NAND
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  Speaker 4: as well.
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  Speaker 5: Yeah, Drake, that's kind kind of where I want to go.
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  Speaker 5: The competitive landscape period feels like there's again you mentioned
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  Speaker 5: kind of three names there is that really kind of
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  Speaker 5: what's driving Are those three companies driving this business?
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  Speaker 4: Yeah? Yeah, Yeah, So ESK Heinex has really had the
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  Speaker 4: lead in high bandwidth memory, Micron has become sort of
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  Speaker 4: a very fast follower, and now there's reports that Samsung
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  Speaker 4: will be supplying into Nvidia's Blackwell Ultra platform, which might
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  Speaker 4: pave the way into Rubin for them as well. So
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  Speaker 4: I mean, I think this three company dynamic that we'd
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  Speaker 4: seen for a very long time. Obviously you've had some
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  Speaker 4: Chinese competitors come on, but this three company dynamic that
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  Speaker 4: we so on traditional dram seems to be now shaping
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  Speaker 4: up again for high bay with memory. So I think
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  Speaker 4: those past, you know, dynamics that we've seen are going
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  Speaker 4: to be the dynamics going forward again.
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  Speaker 1: Stay with us.
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  Speaker 2: Last night, Jimmy Kimmel returned to television a week after
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  Speaker 2: the show was suspended by ABC. The late night host said, quote,
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  Speaker 2: it was never my intention to make light of the
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  Speaker 2: death of a young man he did receive a warm
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  Speaker 2: reception from the audience. Kimmel made an impassioned case for
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  Speaker 2: free speech. He poked fun at President Donald Trump and
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  Speaker 2: the FCC chairman Brendan Carr. He also said that pressuring
• 5:54
  Speaker 2: affiliates to take his show off the air quote is
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  Speaker 2: not legal, and quote is not a American this.
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  Speaker 5: Show, This show is not important. What is important is
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  Speaker 5: that we get to live in a country that allows
• 6:08
  Speaker 5: us to have a show like this. I already thought,
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  Speaker 5: Jimmy Kimmel last night on his return to TV, what
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  Speaker 5: does this mean for the ABC Television network? What does
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  Speaker 5: it mean for the Walt Disney company that owns ABC.
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  Speaker 5: Let's check in Withkeitha Ranganath and Cheese. They media analysts
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  Speaker 5: at Bloomberg Intelligencies based down there in Princeton. Hey, Keitha,
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  Speaker 5: this late night Does it mean anything for the networks anymore?
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  Speaker 5: Do they make any money there?
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  Speaker 6: They don't make a whole lot of money, pauls not anymore.
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  Speaker 6: It's used to be that, you know, late night television
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  Speaker 6: would bring in a lot of ratings, would bring in
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  Speaker 6: a lot of ad dollars. That has really changed. We've
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  Speaker 6: seen we've seen linear TV kind of hemorrhage viewers now
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  Speaker 6: over so many years, and late night is no exception.
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  Speaker 6: So if you just kind of look at, you know,
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  Speaker 6: Jimmy Kimmel's show, for instance, it generates roughly about fifty
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  Speaker 6: million dollar AD revenue. Compare that to a few years
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  Speaker 6: ago when it used to generate close to about one
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  Speaker 6: hundred and fifty million. So definitely AD revenue going down.
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  Speaker 6: And most of these late night shows are losing money
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  Speaker 6: just given the programming budget for these shows. So not
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  Speaker 6: really a needle mover in a financial sense for Disney.
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  Speaker 2: Okay, but in a cultural sense, it is because these
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  Speaker 2: are shows that define the networks. And so thank you
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  Speaker 2: for putting numbers to that, because I think there's a
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  Speaker 2: lot of concern or skepticism from certain corners of American
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  Speaker 2: communities that question whether Stephen Colbert's show should have been
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  Speaker 2: canceled for financial reasons, as CBS asserts it was. KEITHA.
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  Speaker 2: Is ABC going to pay some kind of price for
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  Speaker 2: allowing Kimmel to go back on air because the president,
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  Speaker 2: for instance, alluded to making more money off the company
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  Speaker 2: for doing.
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  Speaker 6: So, Yeah, it's certainly possible. I mean, we've seen President
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  Speaker 6: Trump kind of go after you know, the broadcast networks
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  Speaker 6: threatened to kind of revoke licenses, so he goes after anybody.
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  Speaker 6: He uses his power, you know, the courts, to attack
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  Speaker 6: anybody who says anything unflattering about him. But that's you know,
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  Speaker 6: definitely possible from a Disney perspective, though. You have to
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  Speaker 6: remember this is a very very diversified company. So yes,
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  Speaker 6: ABC is definitely a very important asset. But again, if
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  Speaker 6: you put some numbers around this scarlet, it makes up
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  Speaker 6: only about they generate. Of Disney itself generates about ninety
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  Speaker 6: to one hundred billion dollars in revenue every year. ABC
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  Speaker 6: is about five billion, five to six billion in revenue,
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  Speaker 6: so it's just about five percent for the company. So again,
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  Speaker 6: you know, small potatoes in the context of the company's financials.
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  Speaker 6: But yes, you bring up a very important point about
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  Speaker 6: culture wars. Unfortunately, I think Disney is in a losing
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  Speaker 6: position whichever way, because they're either going to anger you know,
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  Speaker 6: the conservatives or or the other end of the spectrum.
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  Speaker 6: So it's just tough.
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  Speaker 3: Yeah.
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  Speaker 5: Hey, Githa, I noted that two of the big TV
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  Speaker 5: station groups out there, Sinclair Podcast Group and Next Are
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  Speaker 5: they are still not airing Jimmy Kimmel, what's the latest there?
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  Speaker 5: Can they do that? Or is there affiliate affiliation agreement
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  Speaker 5: with the ABC networks? Now you got to cover it,
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  Speaker 5: you got to carry it.
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  Speaker 6: So they you know, the FCC does allow, you know,
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  Speaker 6: broadcast affiliate groups like next Door in Sinclair to preempt
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  Speaker 6: certain programming if it deems fit. So from a legal standpoint, yes,
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  Speaker 6: they are.
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  Speaker 5: Allowed to do that.
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  Speaker 6: Again, we're not sure of the exact contractual language between
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  Speaker 6: Disney or next Door or Sinclair, So again, not sure
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  Speaker 6: how long that's going to drag out. You know, Disney
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  Speaker 6: is a very important partner for both Nexttar and Sinclair.
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  Speaker 6: But remember there's much more here at stake than just
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  Speaker 6: you know, Disney's affiliation agreement. Next Door is in the
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  Speaker 6: midst of a six point two billion dollar deal to
• 9:48
  Speaker 6: acquire tech Now, which is another broadcaster. They do need
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  Speaker 6: the FCC's blessing, and so they're you know, kind of
• 9:54
  Speaker 6: trying to really, you know, please the FCC here, if
• 9:57
  Speaker 6: you will, to kind of get a green green light
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  Speaker 6: on that deal. Sinclair again a similar situation. There's a
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  Speaker 6: whole wave of broadcast consolidation that's supposed to happen and
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  Speaker 6: they all want to be on the FCC's right side.
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  Speaker 2: Very quickly, Geita. In the days following Kimmel suspension, a
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  Speaker 2: number of people canceled or threatened to cancel their Disney
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  Speaker 2: Plus streaming services. Do we have a sense that this
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  Speaker 2: might get kind of noisy when it comes to the
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  Speaker 2: earning supports and the streaming numbers and subscriptions.
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  Speaker 6: I mean, we've seen this kind of backlash before happen,
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  Speaker 6: you know, in the case of certain programming and you
• 10:30
  Speaker 6: know with Netflix, with other streaming services. Typically we haven't
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  Speaker 6: really seen it reflected in the numbers, even though there's
• 10:36
  Speaker 6: a lot of noise around it. So, yes, maybe a
• 10:40
  Speaker 6: little bit of up and down, but I don't think
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  Speaker 6: it'll have again any big needle moving effect on the
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  Speaker 6: Disney Plus subscriber numbers.
• 10:47
  Speaker 5: All right, Keithan, Well we got you here. I have
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  Speaker 5: to ask, do we have any news on succession to
• 10:51
  Speaker 5: Bob Biger?
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  Speaker 6: Hmmm, not yet, not yet, Paul. I mean, that's the
• 10:55
  Speaker 6: biggest question always for Disney. He is supposed to retire
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  Speaker 6: by the end of twenty twenty six. There is a
• 11:01
  Speaker 6: lot of rumblings that it might be somebody internal, you know,
• 11:05
  Speaker 6: we keep hearing about Dana Walden. Of course, nothing certain
• 11:09
  Speaker 6: just yet.
• 11:10
  Speaker 1: Stay with us.
• 11:11
  Speaker 5: More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 11:31
  Speaker 5: That new housing starts came in way higher than expected.
• 11:35
  Speaker 2: Fastest patient's early twenty two unexpected surge there.
• 11:39
  Speaker 5: Yeah, absolutely see what's going on out there in the
• 11:41
  Speaker 5: new housing market, Drew reading Bloomberg Intelligence, US home building
• 11:44
  Speaker 5: analyst joins us. He's down there in Princeton, joining us
• 11:47
  Speaker 5: via that zoom thing, Drew. What's going on in the
• 11:50
  Speaker 5: new housing market?
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  Speaker 3: Yes, some pretty eye popping numbers today from the Census.
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  Speaker 3: Scarlett mentioned the fastest pace since early twenty twenty two,
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  Speaker 3: So I think you need to take these numbers with
• 12:02
  Speaker 3: a grain of salt. The report said that sales were
• 12:05
  Speaker 3: up twenty percent from last month plus or minus twenty
• 12:08
  Speaker 3: two percent, so maybe they were down, maybe they were
• 12:11
  Speaker 3: up a whole lot more.
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  Speaker 5: This is a this.
• 12:15
  Speaker 3: Is a historically volatle data set, and it does contrast
• 12:19
  Speaker 3: with some of the recent data that we've had our
• 12:22
  Speaker 3: friends over a Zondhu track, about eighty five percent of
• 12:25
  Speaker 3: the new home market said sales were up low single
• 12:27
  Speaker 3: digits in the month, still lower from last year, and
• 12:30
  Speaker 3: if we look at applications to purchase new homes, they
• 12:33
  Speaker 3: were actually down six percent sequentially, which is more of
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  Speaker 3: a leading indicator. And on top of that, we heard
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  Speaker 3: from last week from the second largest home builder in
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  Speaker 3: the market, Lenar, who said that they're having to take
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  Speaker 3: their foot off the gas pedal in terms of volume
• 12:48
  Speaker 3: because the market's just not supporting it. They're still having
• 12:50
  Speaker 3: to incentivize buyers. So, you know, we do agree that
• 12:53
  Speaker 3: lower rates will certainly help demand, but we do we
• 12:57
  Speaker 3: think the market snapped back as strong as this report suggests.
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  Speaker 2: Probably not okay, So maybe the numbers will need to
• 13:03
  Speaker 2: be revised, and there's a trend here with numbers being
• 13:06
  Speaker 2: needing to be revised. But the no home sales numbers
• 13:10
  Speaker 2: overall reflect contract signings, which usually take place at least
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  Speaker 2: a month before the transaction is complete, so it may
• 13:15
  Speaker 2: capture a little bit of the turn in the housing market.
• 13:19
  Speaker 2: Could this be the beginning of I don't want to say,
• 13:21
  Speaker 2: an upswing, but at least stabilization.
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  Speaker 5: So I think so.
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  Speaker 3: First of all, the pullback and rates during the month
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  Speaker 3: of August was about ten basis points. We didn't really
• 13:29
  Speaker 3: see that dramatic shift lower until really in September when
• 13:33
  Speaker 3: rates got into the low six percent range. What's interesting
• 13:37
  Speaker 3: is that since the FED cut rates are actually up
• 13:39
  Speaker 3: twenty five basis points to about six point four percent,
• 13:43
  Speaker 3: which is kind of similar to what we saw the
• 13:45
  Speaker 3: last time the cut rates is the FED cut and
• 13:47
  Speaker 3: mortgage rates increased. Like I said, I do think that
• 13:51
  Speaker 3: lower rates are certainly going to help that marginal home buyer.
• 13:55
  Speaker 3: But at the same time, you know, when we talk
• 13:56
  Speaker 3: about housing, rates certainly get all of the attention because
• 13:59
  Speaker 3: of affordability constraints were under but I think you to
• 14:02
  Speaker 3: also focus on the labor market. We've had some pretty
• 14:06
  Speaker 3: large job revisions recently. We actually showed net loss in June,
• 14:11
  Speaker 3: and if you look at some of the survey data,
• 14:12
  Speaker 3: consumers out there have a growing concern about unemployment rates
• 14:16
  Speaker 3: over the next twelve months, and for those that do
• 14:18
  Speaker 3: lose a job, the expectation that they're going to be
• 14:21
  Speaker 3: able to find a new one within you know, the
• 14:23
  Speaker 3: next couple of months is not very strong. So one
• 14:27
  Speaker 3: of the things that we've heard repeatedly from the builders
• 14:29
  Speaker 3: is this lack of confidence which is holding buyers back.
• 14:32
  Speaker 3: So on the margin rates certainly help affordability, they don't
• 14:36
  Speaker 3: solve the problem. So we think it helps buyers on
• 14:38
  Speaker 3: the margin, but again I don't. I don't think broadly speaking,
• 14:42
  Speaker 3: this returns us back to, you know, a more normalized
• 14:46
  Speaker 3: level of transactions.
• 14:47
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