[0:00] How much should you be worried about the
[0:02] memory stock collapse that could
[0:05] potentially destroy the entire hardware
[0:08] stock market? And given that hardware
[0:11] stocks have really contributed to over
[0:13] 75% of the S&P 500's gain since April,
[0:16] makes you wonder how strong can indices
[0:20] hold up if we potentially see a collapse
[0:23] in memory stock prices. Is that even
[0:26] something that's likely to happen? Today
[0:28] is one of the days that has people
[0:30] scratching their heads given that
[0:31] SanDisk and Micron are down over 6%
[0:34] today. Dragging the triple Q's the
[0:37] NASDAQ 100 off that 17 uh 715 level even
[0:41] though we've got that SpaceX inclusion
[0:44] coming up on July 7th. We got to break
[0:47] down exactly what's going on here and
[0:49] what you need to know about how
[0:50] important these memory chip stocks are
[0:54] and what their history generally tells
[0:56] us. So, first things first, I meet Kevin
[0:59] about a week and a half ago. I warned
[1:02] that no matter what happened with Micron
[1:04] for earnings, whether it was good or
[1:06] bad, it was not something I was
[1:08] interested in playing calls on. I made
[1:12] that call not to buy calls. And now
[1:15] Micron is down 17% from peak despite the
[1:19] fact that they absolutely dominated
[1:22] earnings. So, why is Micron down 17% and
[1:26] falling as much as it is today when the
[1:29] company's earnings are doing so freaking
[1:32] well? Well, the answer has to do with
[1:35] history. And no, not my history getting
[1:38] a nod from the Pope, which was really
[1:40] cool in Barcelona just about a couple
[1:43] weeks ago. And yes, we do have a coupon
[1:45] code to the Meet Kevin programs on
[1:47] building your wealth. Of course,
[1:48] remember live streams, trade alerts, and
[1:50] the morning alpha report. Every morning
[1:52] the market is open and expiring
[1:54] tomorrow. But what matters is the
[1:58] history of memory. See, when we actually
[2:01] look at memory prices, people have a lot
[2:03] of prognostications on what memory
[2:05] prices are going to do. For example,
[2:07] here's a guy called the money guy. He
[2:09] runs a blog and he argued that we might
[2:12] end up seeing a dramatic collapse in
[2:15] memory prices in 2025. Fingers crossed,
[2:20] hopefully not. Because he basically drew
[2:23] this line going all the way back to
[2:25] 2005. drew a trend line of monthly
[2:29] memory revenue and suggested that hey we
[2:32] go through these ups and downs along
[2:34] this line and if we get a little up here
[2:37] we might get a down again in 2025. In
[2:40] fact literally wrote over here revenues
[2:42] seem to have followed the pattern of the
[2:44] past and this could mean we'll have
[2:46] another boom and bust cycle with a
[2:48] sizable downturn in 2025. Let's hope
[2:51] that doesn't happen again. And this was
[2:54] written back when memory prices were
[2:56] collapsing in October of 2023.
[3:01] What's fascinating about this is October
[3:04] of 2023 actually led to losses in the
[3:08] memory divisions of Samsung and of
[3:10] course the entire companies of SKHX and
[3:13] Micron. In fact, Samsung lost 11.6
[3:16] billion as recently as 2023. That's just
[3:20] 3 years ago. So, three annual reports
[3:23] ago, we could say two annual reports ago
[3:25] since we don't have an annual report out
[3:26] for this year yet, Samsung lost 11.5
[3:29] billion on their memory sector, Micron
[3:32] as a company as a whole lost $6 billion
[3:34] and SKHEX lost $7 billion
[3:37] in a year. In fact, it got so bad at
[3:41] Micron that their number one risk
[3:45] factor, the very first risk factor that
[3:49] they list on their annual report, which
[3:51] is volatility in annual uh in average
[3:54] selling prices is exactly what ended up
[3:58] tanking their revenue in 2023. Take a
[4:01] look at this. In 2023, Micron made about
[4:04] $15.5 billion of revenue, but it
[4:08] actually cost them $16.9 billion to
[4:12] manufacture those chips. That means they
[4:14] were actively running their chip
[4:17] fabrications at a loss. chips require
[4:21] basically high volumes and almost 100%
[4:25] utilizations in the factory uh in their
[4:28] factories memory chips to actually
[4:30] sustain profitability and when you can
[4:33] go from hey look we made $10.4 billion
[4:37] during COVID you know 2021 over here
[4:39] right after co I suppose and 2022 we
[4:43] made $14 billion oh just kidding now we
[4:46] lost $1.4 $4 billion in gross margin.
[4:49] And actually, instead of making uh money
[4:52] over here at net income, yeah, we lost
[4:54] about $6 billion. So, every penny we net
[4:58] in 2021, we turned around and lost in
[5:02] 2023.
[5:04] This has nothing to do with Micron being
[5:06] a good or bad business. It has
[5:08] everything to do with risk factor number
[5:10] one, volatility in price. And this is
[5:14] why memory chips and memory chip stocks
[5:17] really, in my opinion, are kind of like
[5:19] oil and oil companies. Oil companies
[5:22] make a lot of money when oil is
[5:24] expensive, and they lose lots of money
[5:26] when oil gets cheap. That's why it's
[5:28] their number one risk factor. Listen to
[5:30] this. Average selling prices for DRAM
[5:33] declined in the high 40% range and NAN
[5:37] declined in the low 50% range for 2023.
[5:41] And since 2017, annual price changes in
[5:45] DRAM selling prices have ranged from
[5:47] plus 35 to minus the high 40s percents.
[5:52] So in other words, they're basically
[5:54] saying, hey, like over the past decade,
[5:58] we have seen memory prices go up 40%
[6:02] year-over-year to well 35%. To down
[6:06] almost 50% year-over-year. down 50% is
[6:11] bad because you know we could go up 200%
[6:13] in prices but down 50% you know those
[6:16] numbers they add up really quickly and
[6:17] you stay in these holes. In fact they
[6:19] indicated that since 2017 they say it
[6:22] right here annual price changes in NAND
[6:24] average selling prices have ranged from
[6:26] nearly flat to minus 50%. So DRAM at
[6:31] least had plus NAND was flat to negative
[6:34] 50%. average selling prices for our
[6:37] products that declined faster than our
[6:39] costs have recently had an adverse
[6:41] effect on our business and operations.
[6:43] So in other words, memory was in a poopy
[6:46] dupy situation in 2023. And that was one
[6:49] of the reasons a lot of these memory
[6:50] chip stocks absolutely plummeted in
[6:53] value and they sold for really really
[6:55] cheap prices right at the beginning of
[6:58] artificial intelligence. And then of
[6:59] course in 2025 everybody got really
[7:01] excited about a gentic AI which has
[7:03] substantially more memory demands. And
[7:06] of course I'm oversimplifying here but
[7:08] what happens the commodity that is
[7:10] memory which is exactly pinforpin
[7:13] replaceable with a different company's
[7:14] memory chips. It is a commodity uh well
[7:18] skyrocketed because now we have
[7:20] enthusiasm over aentic. But we have to
[7:24] take a look at the last two quarterly
[7:26] reports to see what kind of pressure we
[7:28] actually have on Micron and the
[7:32] importance that they keep delivering to
[7:36] keep this market propped up. Now, quick
[7:38] reminder, yes, we are expiring coupon
[7:41] code tomorrow. It's coupon code pope.
[7:44] You could join the alpha report every
[7:46] morning where we talk short-term,
[7:48] medium-term, long-term trade alerts.
[7:49] Part of that is because over at Reinvest
[7:52] AI, so reinvest.co, we are releasing the
[7:56] valuation product tomorrow. This has
[7:59] been in beta since about Thanksgiving
[8:01] with more or less likely deals, but
[8:03] we're actually coming out with where we
[8:05] think deals can rank based on how much
[8:07] money you can make off of them. So,
[8:09] we're really excited about that. Both of
[8:11] these products will have an expiring
[8:12] coupon code tomorrow. So, the Meke Kevin
[8:14] membership as well as the Reinvest AI.
[8:17] That's the house hack uh product over at
[8:19] reinvest.co or meet Kevin.com for the
[8:22] Meke Kevin membership. So, what do we
[8:24] need to know when it comes to Micron's
[8:25] last earnings? Well, take a look at this
[8:28] right here. You've got Q3 Micron. All
[8:31] right, these are the numbers that just
[8:33] came out. What I want you to do is just
[8:35] see the difference between these two
[8:37] quarterly reports. I flash them back and
[8:40] forth. I basically perfectly aligned
[8:42] them for you. This one right here with
[8:45] the lack of highlighting. I'll use some
[8:47] red over here. This was last quarter's
[8:50] report and it was really good. In fact,
[8:53] if as a course member you go over to the
[8:55] stock tab, you can see I highlighted the
[8:58] crap out of these documents. Just to
[9:00] give you some ideas over here, this
[9:02] company put 11.7 billion into capex in
[9:05] just Q1. They expect to spend $25
[9:07] billion. They're expanding their high
[9:10] bandwidth me uh memory facility in
[9:12] Singapore in 2027. We expect more
[9:16] facilities to come online in uh what do
[9:18] we got over here? We've got the Idaho uh
[9:21] production um or or Idaho memory
[9:24] facility is expecting to come online
[9:26] midcal 27. That would be next year. Then
[9:29] we've got another fab coming out at the
[9:31] end of 28. We got another fab coming out
[9:34] in 2030. So, we've got more
[9:36] manufacturing coming out. And we've gone
[9:38] deep into why this is happening. A lot
[9:41] of this has to do with the CHIPS Act,
[9:43] which Donald Trump secretly hates. Well,
[9:45] actually publicly hates, but secretly
[9:47] sort of coordinates money on. Uh they
[9:49] get investment tax credits, not only
[9:51] from the chips act, 35% credits, but
[9:53] also from the state of New York. They've
[9:55] got multiple different segments over
[9:57] here. But some things that are worth
[9:58] pointing out when I look at this stock
[10:00] tab over on the uh in the mechan
[10:02] membership is uh that the two components
[10:06] that are outside of data centers are
[10:08] actually falling right now. Mobile and
[10:10] client business unit sector and the
[10:12] automotive and embedded business units
[10:14] are actually seeing declines in memory
[10:17] chip demand. Whereas really it's just
[10:19] that AI cycle that's driving these price
[10:22] demands. And I made this analogy on
[10:25] average selling prices this morning
[10:27] because these average selling prices are
[10:29] going crazy. And I'll tell you the
[10:30] analogy in just a moment that I talked
[10:31] about uh to course members. But look at
[10:34] this. This is the highlight version of
[10:36] the uh average selling prices. We have
[10:39] seen about 8 to 9% quarterly growth for
[10:43] actual unit deliveries. Uh that works
[10:46] out to about 32 to call it 40% unit
[10:49] growth. So they are selling more units,
[10:52] right? But they raised prices between 60
[10:57] to 70% just from the first quarter to
[11:01] the second quarter. And year-over-year
[11:03] they raised prices twofold. They doubled
[11:06] prices right here. Year-over-year
[11:09] compared to the second quarter of last
[11:10] year. DRAM prices are up 110%.
[11:16] Roughly closer maybe to 115%. and nan
[11:19] prices increased slightly more than
[11:22] double. These are massive, massive
[11:25] increases in price, which is exactly the
[11:29] opposite of what happened in 2022 when
[11:32] we saw memory chip prices crater,
[11:36] absolutely collapse. It got so bad that
[11:40] the dude who blogs about memory prices
[11:42] basically said, "Man, it's so bad we
[11:45] might actually end up having another
[11:46] downturn in 2025, which was exactly the
[11:50] opposite of what happened thanks to
[11:51] artificial intelligence." And I'm not
[11:53] trying to blame them or bag on them. You
[11:55] know, AI changed a lot. But the point
[11:56] is, people are so used to the boom and
[11:59] bust cycles that they draw lines like
[12:01] this and they're like, "It's going to be
[12:02] bad again, boys and girls. It's going to
[12:04] suck again." except what actually
[12:08] happened. A boom in prices again. And
[12:11] that's why I want to show you the
[12:13] difference between these and then I'm
[12:14] going to give you the analogy from this
[12:16] morning's course member live stream.
[12:18] Look at this. This uh was the last
[12:21] quarterly report without the
[12:22] highlighting. See right here, you can
[12:23] see that mid 110% range and slightly
[12:26] more than 100% increase in average
[12:28] selling prices. Are you ready to see
[12:30] their most recent earnings report, which
[12:32] was an absolute banger? Like literal
[12:35] banger. They beat on everything.
[12:37] Absolutely smoking great earnings. The
[12:40] best freaking earnings you could see. I
[12:42] mean, this company is printing freaking
[12:45] money. Okay. Why? Why in part are they
[12:49] printing freaking money? Okay, you ready
[12:51] for this? You think it's because the
[12:53] business somehow is able to make a
[12:55] better chip?
[12:57] Maybe. I actually think it has a whole
[12:59] lot more to do with this. Ready? Watch
[13:01] when I flip this page. Boom.
[13:03] Year-over-year,
[13:05] prices have now increased. Instead of
[13:08] 110% 115% range, they've actually
[13:11] increased quote 260%
[13:15] increase in average selling prices. And
[13:18] NAND products are up about 315%.
[13:25] What? Yeah, dude. That's a triple and a
[13:29] quadruple in average selling prices. So,
[13:32] literally in the last report, I'm like,
[13:34] "Oh my gosh, most of their increase in
[13:37] revenue is coming because of price
[13:38] increases because they're doubling the
[13:41] prices of chips." Well, now they've
[13:43] said, "Hey, JK, we're actually tripling
[13:45] and quadrupling prices and that's why
[13:48] we're making so much money." And this is
[13:50] where it's really useful to understand
[13:53] an analogy that I'm about to give you
[13:55] because it helps you understand why
[13:58] Micron is falling since my micron
[14:01] warning and SanDisk is falling since my
[14:05] micron warning. Why? Okay, so I'm going
[14:08] to take out the good old whiteboard
[14:10] here. And this I I actually I really
[14:14] like this analogy. I hope you like it,
[14:16] too. The uh the thing is when when I
[14:20] make these analogies, sometimes people
[14:22] sort of think, "All right, video's
[14:24] over." They bail, and then they miss the
[14:27] most important parts. These analogies, I
[14:30] feel like, are the things that could
[14:31] help you get that sort of aha moment.
[14:33] You go, "Ah, I get it. Yeah, that makes
[14:36] a lot of sense." And what I'm about to
[14:38] tell you is really a way to think about
[14:41] the entire artificial intelligence
[14:44] euphoria that we've been seeing. Okay?
[14:47] So the analogy I'm going to give you is
[14:50] an analogy on real estate, but again,
[14:54] we're using real estate just to help you
[14:56] think of the chip sector. And you might
[14:58] be like, Kevin, what do houses have to
[15:00] do with chips? Watch this. Okay, so you
[15:03] might know this. I run this company
[15:04] called House Hack, aka Reinvest. See, I
[15:07] got the little shirt on. Uh, and it's a
[15:09] company that owns over 80, 90ish million
[15:12] dollars in real estate and assets, no
[15:14] bank debt. And, uh, you know, I think
[15:16] we're doing really good things. We've
[15:17] got cool apps. We got cool software, a
[15:19] great software business on top of we own
[15:22] real estate. And if somebody came to me
[15:24] and said, "Hey, Kevin, we want you to
[15:26] take a billion dollars and go buy
[15:30] houses, but we want you to buy houses
[15:33] the way you always buy houses. We want
[15:36] you to get houses at a 20% discount. We
[15:40] want you to play like Warren Buffett,
[15:41] okay? Do your best to go out there, take
[15:44] that billion bucks and get 20% discounts
[15:47] on as many houses as you can. Work your
[15:49] freaking butt off. It's going to be a
[15:51] lot of work. Go make that ROI, right? In
[15:55] this case, I need you to know that ROI
[15:58] or a return on investment is going to
[16:01] equal time. It would probably take me a
[16:05] couple years to go deploy a billion
[16:07] dollars. I think I would do a really
[16:08] good job at it. Right? Okay. I'm telling
[16:11] you, there's an analogy on chips in
[16:13] this. I know people are like, "Kevin,
[16:14] are you just trying to sell house hack?"
[16:15] No, we're reinvest. Oh, no. No. It's an
[16:17] analogy here. Ready? And this is why you
[16:19] you stay to the ends of the videos. I
[16:21] think you actually benefit here, but
[16:22] with the aha moments. Are you ready for
[16:24] this? Now, what if somebody came to me
[16:27] and then said, "Kevin, we need you to
[16:29] buy a billion dollars of real estate. We
[16:31] don't actually care about the 20% or
[16:34] ROI. We need this spent now and uh we're
[16:40] not pointing a gun at your head. Uh if
[16:43] you don't spend that billion dollars
[16:45] now, call it within the next week or
[16:47] two, we're going to kill you.
[16:51] Okay,
[16:53] guess what I'm going to do when it comes
[16:56] to buying a billion dollars worth of
[16:58] houses? Well, I'm going to go out there
[17:00] and I'm going to buy every freaking
[17:02] active listing and I don't care how much
[17:04] I have to pay. I will overpay. I will
[17:07] over bid. I will do whatever the hell I
[17:09] need to do to get those houses cuz I
[17:11] don't want to, you know. Okay. Why does
[17:15] that matter relative to chips? Because
[17:18] what's happening in the chip industry
[17:20] right now is nobody cares about ROI.
[17:24] People just care about I need it now. I
[17:29] need the memory chips now. I need the
[17:32] fuel cells now. We don't have time to
[17:35] wait for the company FCL who just raised
[17:39] $49 million of financing and for some
[17:41] reason is memeing a little bit which is
[17:43] nonsense because they actually need to
[17:45] prove that they could sell their
[17:46] product. Uh but you know more relatively
[17:48] you could look at a company like Bloom
[17:50] Energy. Bloom Energy kills it with fuel
[17:52] cells. fuel cells. You could get a
[17:54] permit for these in like 2 or 3 months
[17:56] and pop them up. They're not anywhere
[17:58] near as efficient as a turbine natural
[18:01] gas power plant, but permits for that
[18:03] take 4 to 5 years. They're certainly not
[18:06] as cost effective as doing a turbine
[18:08] natural gas power plant combined with
[18:10] solar and wind. But that takes years.
[18:15] Nobody wants to wait years for their
[18:17] energy at a data center right now. They
[18:19] want it now. They want their memory
[18:20] chips now. They want their Nvidia GPUs.
[18:23] Now, nobody cares about the ROI
[18:29] and savvy investors realize that we
[18:33] might be getting to the point of
[18:36] insanity in terms of how much companies
[18:38] are able to raise prices when they can
[18:41] literally write in their reports, hey,
[18:42] we just uh triple and quadrupled prices.
[18:45] When a company tells you, hey, we're
[18:47] dominating because we just tripled and
[18:49] quadrupled prices. and you know it is a
[18:51] cyclical commodity. People start going,
[18:55] "Okay, how much better can this really
[18:59] get?"
[19:00] Maybe, just maybe, it's time to take a
[19:04] little bit of profit.
[19:06] Anyway, thanks for watching. Consider
[19:08] subscribing to the channel. Make sure
[19:09] you use that coupon code pope for more
[19:12] perspectives uh and analysis,
[19:14] fundamental analysis, technical
[19:16] analysis, short-term trades, medium-term
[19:18] trades, long-term trades, uh top stocks
[19:20] that I'm looking at buying over the next
[19:22] 10 years and more. So, go check it out
[19:25] over at meetke.com. And remember, if you
[19:28] want that Reinvest AI, you can check
[19:30] that out as well at houseack.com or
[19:32] reinvest.co. Same thing. Thanks so much
[19:34] for watching. We'll see you in the next
[19:35] one. Goodbye.
[19:36] >> Why not advertise these things that you
[19:37] told us here? I feel like nobody else
[19:39] knows about this.
[19:39] >> We'll we'll try a little advertising and
[19:41] see how it goes.
[19:42] >> Congratulations, man. You have done so
[19:43] much. People love you. People look up to
[19:45] you.
[19:45] >> Kevin Praath there, financial analyst
[19:47] and YouTuber. Meet Kevin. Always great
[19:49] to get your take.