The Memory AI Stock Collapse is STARTING

[00:00] How much should you be worried about the

[00:02] memory stock collapse that could

[00:05] potentially destroy the entire hardware

[00:08] stock market? And given that hardware

[00:11] stocks have really contributed to over

[00:13] 75% of the S&P 500's gain since April,

[00:16] makes you wonder how strong can indices

[00:20] hold up if we potentially see a collapse

[00:23] in memory stock prices. Is that even

[00:26] something that's likely to happen? Today

[00:28] is one of the days that has people

[00:30] scratching their heads given that

[00:31] SanDisk and Micron are down over 6%

[00:34] today. Dragging the triple Q's the

[00:37] NASDAQ 100 off that 17 uh 715 level even

[00:41] though we've got that SpaceX inclusion

[00:44] coming up on July 7th. We got to break

[00:47] down exactly what's going on here and

[00:49] what you need to know about how

[00:50] important these memory chip stocks are

[00:54] and what their history generally tells

[00:56] us. So, first things first, I meet Kevin

[00:59] about a week and a half ago. I warned

[01:02] that no matter what happened with Micron

[01:04] for earnings, whether it was good or

[01:06] bad, it was not something I was

[01:08] interested in playing calls on. I made

[01:12] that call not to buy calls. And now

[01:15] Micron is down 17% from peak despite the

[01:19] fact that they absolutely dominated

[01:22] earnings. So, why is Micron down 17% and

[01:26] falling as much as it is today when the

[01:29] company's earnings are doing so freaking

[01:32] well? Well, the answer has to do with

[01:35] history. And no, not my history getting

[01:38] a nod from the Pope, which was really

[01:40] cool in Barcelona just about a couple

[01:43] weeks ago. And yes, we do have a coupon

[01:45] code to the Meet Kevin programs on

[01:47] building your wealth. Of course,

[01:48] remember live streams, trade alerts, and

[01:50] the morning alpha report. Every morning

[01:52] the market is open and expiring

[01:54] tomorrow. But what matters is the

[01:58] history of memory. See, when we actually

[02:01] look at memory prices, people have a lot

[02:03] of prognostications on what memory

[02:05] prices are going to do. For example,

[02:07] here's a guy called the money guy. He

[02:09] runs a blog and he argued that we might

[02:12] end up seeing a dramatic collapse in

[02:15] memory prices in 2025. Fingers crossed,

[02:20] hopefully not. Because he basically drew

[02:23] this line going all the way back to

[02:25] 2005. drew a trend line of monthly

[02:29] memory revenue and suggested that hey we

[02:32] go through these ups and downs along

[02:34] this line and if we get a little up here

[02:37] we might get a down again in 2025. In

[02:40] fact literally wrote over here revenues

[02:42] seem to have followed the pattern of the

[02:44] past and this could mean we'll have

[02:46] another boom and bust cycle with a

[02:48] sizable downturn in 2025. Let's hope

[02:51] that doesn't happen again. And this was

[02:54] written back when memory prices were

[02:56] collapsing in October of 2023.

[03:01] What's fascinating about this is October

[03:04] of 2023 actually led to losses in the

[03:08] memory divisions of Samsung and of

[03:10] course the entire companies of SKHX and

[03:13] Micron. In fact, Samsung lost 11.6

[03:16] billion as recently as 2023. That's just

[03:20] 3 years ago. So, three annual reports

[03:23] ago, we could say two annual reports ago

[03:25] since we don't have an annual report out

[03:26] for this year yet, Samsung lost 11.5

[03:29] billion on their memory sector, Micron

[03:32] as a company as a whole lost $6 billion

[03:34] and SKHEX lost $7 billion

[03:37] in a year. In fact, it got so bad at

[03:41] Micron that their number one risk

[03:45] factor, the very first risk factor that

[03:49] they list on their annual report, which

[03:51] is volatility in annual uh in average

[03:54] selling prices is exactly what ended up

[03:58] tanking their revenue in 2023. Take a

[04:01] look at this. In 2023, Micron made about

[04:04] $15.5 billion of revenue, but it

[04:08] actually cost them $16.9 billion to

[04:12] manufacture those chips. That means they

[04:14] were actively running their chip

[04:17] fabrications at a loss. chips require

[04:21] basically high volumes and almost 100%

[04:25] utilizations in the factory uh in their

[04:28] factories memory chips to actually

[04:30] sustain profitability and when you can

[04:33] go from hey look we made $10.4 billion

[04:37] during COVID you know 2021 over here

[04:39] right after co I suppose and 2022 we

[04:43] made $14 billion oh just kidding now we

[04:46] lost $1.4 $4 billion in gross margin.

[04:49] And actually, instead of making uh money

[04:52] over here at net income, yeah, we lost

[04:54] about $6 billion. So, every penny we net

[04:58] in 2021, we turned around and lost in

[05:02] 2023.

[05:04] This has nothing to do with Micron being

[05:06] a good or bad business. It has

[05:08] everything to do with risk factor number

[05:10] one, volatility in price. And this is

[05:14] why memory chips and memory chip stocks

[05:17] really, in my opinion, are kind of like

[05:19] oil and oil companies. Oil companies

[05:22] make a lot of money when oil is

[05:24] expensive, and they lose lots of money

[05:26] when oil gets cheap. That's why it's

[05:28] their number one risk factor. Listen to

[05:30] this. Average selling prices for DRAM

[05:33] declined in the high 40% range and NAN

[05:37] declined in the low 50% range for 2023.

[05:41] And since 2017, annual price changes in

[05:45] DRAM selling prices have ranged from

[05:47] plus 35 to minus the high 40s percents.

[05:52] So in other words, they're basically

[05:54] saying, hey, like over the past decade,

[05:58] we have seen memory prices go up 40%

[06:02] year-over-year to well 35%. To down

[06:06] almost 50% year-over-year. down 50% is

[06:11] bad because you know we could go up 200%

[06:13] in prices but down 50% you know those

[06:16] numbers they add up really quickly and

[06:17] you stay in these holes. In fact they

[06:19] indicated that since 2017 they say it

[06:22] right here annual price changes in NAND

[06:24] average selling prices have ranged from

[06:26] nearly flat to minus 50%. So DRAM at

[06:31] least had plus NAND was flat to negative

[06:34] 50%. average selling prices for our

[06:37] products that declined faster than our

[06:39] costs have recently had an adverse

[06:41] effect on our business and operations.

[06:43] So in other words, memory was in a poopy

[06:46] dupy situation in 2023. And that was one

[06:49] of the reasons a lot of these memory

[06:50] chip stocks absolutely plummeted in

[06:53] value and they sold for really really

[06:55] cheap prices right at the beginning of

[06:58] artificial intelligence. And then of

[06:59] course in 2025 everybody got really

[07:01] excited about a gentic AI which has

[07:03] substantially more memory demands. And

[07:06] of course I'm oversimplifying here but

[07:08] what happens the commodity that is

[07:10] memory which is exactly pinforpin

[07:13] replaceable with a different company's

[07:14] memory chips. It is a commodity uh well

[07:18] skyrocketed because now we have

[07:20] enthusiasm over aentic. But we have to

[07:24] take a look at the last two quarterly

[07:26] reports to see what kind of pressure we

[07:28] actually have on Micron and the

[07:32] importance that they keep delivering to

[07:36] keep this market propped up. Now, quick

[07:38] reminder, yes, we are expiring coupon

[07:41] code tomorrow. It's coupon code pope.

[07:44] You could join the alpha report every

[07:46] morning where we talk short-term,

[07:48] medium-term, long-term trade alerts.

[07:49] Part of that is because over at Reinvest

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[07:56] valuation product tomorrow. This has

[07:59] been in beta since about Thanksgiving

[08:01] with more or less likely deals, but

[08:03] we're actually coming out with where we

[08:05] think deals can rank based on how much

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[08:11] these products will have an expiring

[08:12] coupon code tomorrow. So, the Meke Kevin

[08:14] membership as well as the Reinvest AI.

[08:17] That's the house hack uh product over at

[08:19] reinvest.co or meet Kevin.com for the

[08:22] Meke Kevin membership. So, what do we

[08:24] need to know when it comes to Micron's

[08:25] last earnings? Well, take a look at this

[08:28] right here. You've got Q3 Micron. All

[08:31] right, these are the numbers that just

[08:33] came out. What I want you to do is just

[08:35] see the difference between these two

[08:37] quarterly reports. I flash them back and

[08:40] forth. I basically perfectly aligned

[08:42] them for you. This one right here with

[08:45] the lack of highlighting. I'll use some

[08:47] red over here. This was last quarter's

[08:50] report and it was really good. In fact,

[08:53] if as a course member you go over to the

[08:55] stock tab, you can see I highlighted the

[08:58] crap out of these documents. Just to

[09:00] give you some ideas over here, this

[09:02] company put 11.7 billion into capex in

[09:05] just Q1. They expect to spend $25

[09:07] billion. They're expanding their high

[09:10] bandwidth me uh memory facility in

[09:12] Singapore in 2027. We expect more

[09:16] facilities to come online in uh what do

[09:18] we got over here? We've got the Idaho uh

[09:21] production um or or Idaho memory

[09:24] facility is expecting to come online

[09:26] midcal 27. That would be next year. Then

[09:29] we've got another fab coming out at the

[09:31] end of 28. We got another fab coming out

[09:34] in 2030. So, we've got more

[09:36] manufacturing coming out. And we've gone

[09:38] deep into why this is happening. A lot

[09:41] of this has to do with the CHIPS Act,

[09:43] which Donald Trump secretly hates. Well,

[09:45] actually publicly hates, but secretly

[09:47] sort of coordinates money on. Uh they

[09:49] get investment tax credits, not only

[09:51] from the chips act, 35% credits, but

[09:53] also from the state of New York. They've

[09:55] got multiple different segments over

[09:57] here. But some things that are worth

[09:58] 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.