Micron delivered an outstanding earnings report, far better than expected. Revenue was projected to come in at $35.8 billion, but the company posted $41.46 billion. EPS was expected to be $21, yet Micron reported $25.11. The stock finished the day up 11%.
The company also announced that it has signed 15 major contracts, including agreements related to data centers. According to Micron, a fully autonomous vehicle requires roughly 10 times more memory than a conventional vehicle, and if robotics adoption expands, robots could require another 10 times more memory than autonomous driving systems.
Operating margins improved significantly as well, rising from 74.9% last year to 85.97%.
Traditionally, the memory semiconductor industry has been viewed as a cyclical business where prices rise and fall repeatedly. However, Micron stated that long-term contracts now account for roughly 50% of its revenue, which could help stabilize the business more than investors have seen in previous cycles.
In the post I wrote yesterday, I considered several approaches: selling during temporary rallies and buying back after pullbacks, adding more shares around the 20-day, 60-day, and 120-day moving averages, or simply continuing with a dollar-cost averaging strategy. The reality, though, is that most working professionals do not have unlimited cash available. When a sudden pullback occurs, it is not always easy to sell SGOV and immediately rotate into a memory ETF like DRAM.
For AI demand to truly accelerate, AI agents need to become deeply integrated into products like Microsoft Office and see broader real-world adoption. We also need to see a meaningful increase in the use of autonomous vehicles. However, autonomous driving faces strict oversight from the U.S. National Highway Traffic Safety Administration (NHTSA), making it difficult for real-world adoption rates to increase rapidly.
For now, I think the key is to keep monitoring how memory-related contracts continue to grow. The Magnificent Seven companies have also been issuing corporate bonds, and the level of cost pressure they face will depend heavily on how much the Federal Reserve allows Treasury yields to rise starting in September.
Kevin Warsh appears to envision himself as a Greenspan-style Fed Chair, which suggests he may be supportive of continued growth in the AI sector since AI is one of the few industries capable of driving meaningful increases in U.S. GDP.
Trump pushed aggressively to reopen the Strait of Hormuz, and there are now forecasts suggesting that oil prices could fall back into the $70 range.
Of course, my current thoughts are still interpretations made with the benefit of hindsight. If I could go back just three days, I probably would have continued questioning whether AI was truly not a bubble.
But Micron's earnings have once again confirmed that AI industry growth is real. Given that, I think the right approach is either to increase holdings with conviction or maintain current allocations rather than becoming overly cautious.
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