Memory chip manufacturer Micron Technology, Inc. (NASDAQ:MU)’s shares are up by more than a whopping 700% over the past year. The firm is a key link in the AI supply chain as it provides memory chips that work with AI GPUs inside a data center. Cramer has discussed Micron Technology, Inc. (NASDAQ:MU) several times over the past couple of months. He has repeatedly praised the firm’s CEO as being too humble. After visiting the firm’s facilities in Boise, Idaho, Cramer discussed the firm’s shares and commented on the impact of the South Korean market:
“And I was out at Micron. And it was very clear the demand was incredible, they’re going to make a fortune. But this weekend, the Samsung buyback was regarded as being not good enough. And that’s because they didn’t end up crunching shares, unlike SK hynix. I saw Korea drop our tech this morning. It just killed us. And you wouldn’t have been able to kill us if bonds are strong. I just find that we’re defaulting to, alright, give me anything but tech, give me anything but data center. We’ve got, they’ve dug their own graves. . .so just give me JNJ and go home!
“That why I said, go to Micron, which fundamentally has an amazing product, and it’s doing the right thing water, doing the right thing with the environment, doing the right thing with electricity. But it doesn’t matter, you see because, Samsung’s buyback was nonexistent. It was chimerical. And that’s what controls Micron. . .look it’s doing 34 times, not because anything that it did, down 34 times because people decided the Samsung buyback? Well I mean, are they really joined to the hip? It’s not whether they should be, it’s that they are.”
As is the case with AI GPU and CPU stocks, the debate for Micron Technology, Inc. (NASDAQ:MU) surrounds the durability of the booming demand for its AI chips. The semiconductor market has traditionally been a cyclical sector where manufacturers often have had to balance out booming demand with capacity increases to ensure that they avoid over-investment and low utilization. Micron Technology, Inc. (NASDAQ:MU)’s latest financials, i.e., those for its fiscal third quarter, saw the firm post 346% annual revenue growth and $100 billion in AI contracted revenue locked through 2030. Additionally, like other chip suppliers, the firm has also locked in long term agreements, which Cramer might argue indicate that the business is now secular instead of cyclical.
Yet, at the same time, there are risks present. For instance, roughly 20% of Micron Technology, Inc. (NASDAQ:MU)’s revenue comes from China. With the global memory chip market in a historic squeeze, domestic Chinese manufacturers such as CXMT are also ramping up capacity to capture market share. Similarly, with Micron Technology, Inc. (NASDAQ:MU) investing $100 billion to expand its domestic capacity, if its Korean rivals SK hynix and Samsung also increase their production, the firm might have an oversupply problem on its hands.
On the valuation front, Micron Technology, Inc. (NASDAQ:MU) is trading at a forward P/E ratio of 6.02 which is significantly lower than Intel’s 68.97 and AMD’s 61. As for the hedge funds, the second quarter saw significant movement. According to Insider Monkey’s data, 154 out of 1,022 funds had held a stake in Micron Technology, Inc. (NASDAQ:MU) in Q1 and this figure jumped to 184 out of 1,006 in Q2. Among the notable bumps was Coatue Management, which increased its stake by 1,794% to $3.6 billion.
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Disclosure: None.
