Is Wall Street’s Memory Model Starting to Break?

Hey guys, welcome back. Hope you're having a great Friday night. I want to talk memory tonight because we saw a fabulous week. You know, this the sector has been incredibly resilient. We have ups and downs. So, the fact that Micron is walking away from this trading week with about a 7% increase in stock price and it has gotten over the $1,100 mark twice this week, I think is a strong sign for the stock as we head into its major catalyst. It's Q4 earnings that'll be dropped on the street next week. But let's take a look at all of them. How did the Fab Five perform this week? We're going to take a look at Micron, SanDisk, Western Digital, Seagate as well as SKH Highix because there's major stories that unfolded across both the memory and the storage ecosystem this week that just show us the exact demand, the signals showing where this market and sector is moving and what does the demand look like long term because we are seeing in my opinion a distinct shift in how institutional money is positioning themselves across this sector. and we're seeing major demand signals. I want to talk about a few today. So, first we'll talk about the performance of the stocks, but then let's dive in and talk about the macro capex escalation that Goldman Sachs highlighted in their article today. It's not just 2027, guys. It's out into 2028. And we're showing that the hyperscalers are continuing to be committed to building out this AI infrastructure and that's going to have a positive impact on memory. And then the reality is that HBM we know the most advanced memory the most premium memory that we see in this market that Micron Samsung and SKHX develop 85% of that allocation is already committed to three customers in 2027. Can you guess what three customers those are? Drop it down in the comments below. But we're going to talk about it in tonight's video because that is just going to show us just how constrained this market will be. because if you're beyond those three customers, you're going to be fighting for the 15% of supply that is left over in this market. And then finally, I want to end the video by talking about a major partnership today that was announced with Anthropic, the impact that it'll have on the memory sector and what does it mean overall as we start to shift into the inference phase of this next super cycle. So guys, before we jump in, make sure you hit like, make sure you subscribe to Market Signal. I want you to be part of this channel as we grow it together. Make sure you do subscribe so you can continue to get my updates and videos that I drop every day that focuses not only on tech, but has a heavy focus on the memory sector and what you need to know as an investor. All right, let's start off by just taking a look at what we saw with the sector today. If I jump over to my watch list that we saw in market watch here, you can see all five of the Fab Five were up today. They finished the week strong. They were up on a positive mark. Micron finished just over a,082 a share about a$1.75 today.16% increase volume was it was a little light uh you can see it was about 21 million shares today that is a little bit below their average volume overall but we saw sandisk up by $24 today just under one and a half% increase for them on 7.3 million shares it closed just just under 1778 a share Western Digital and Seagate have had a strong week. Western Digital was up by about one and a half% $6.50 for the stock. It is just under $457 a share. And then Seagate, it cracked the $900 mark again. It held it today. It was up about $11, just over 1%, and it's holding right now about 917 a share. And then finally, the SKH ADR. It was up over five dollars today. Getting pretty close to $200 per ADR. That would be a great sign for them to see. We know how if you got in early for this, you've seen some great value for that ADR in the market today. But let's take a look at not only today, but what have these stocks done for the last week. So, I'm looking at the NASDAQ 100 here. I'm going to change this time frame here from one day performance to the oneweek performance. And you can start to see where the green shifts on this map. And you can see Micron right here for the week just over a 6 and a half% increase. Now if we scroll down to the other members at least the other three within the memory sector you see actually SanDisk was was down for the week. So it was kind of up and down. We know SanDisk is the highest beta stock within this group. It has rapid escalation and deescalation but it was pretty much flat for the week as you can see where we're ending the week overall. But uh Seagate was up similar to Micron. It was just about under 7% as well. And Western Digital was up about three and a half% for the week. But let's just take a step back. Let's have a longer view. Let's look for the month. How have they done over the last month? And I know this is hard for us at times because we live and we often operate in such short windows and we're very reactive at times as we see our stocks move up and down. But it's always nice to just take a step back, look at a longer term view, particularly if you're a long-term investor like myself. You can see here, Micron up over 15% in the one-mon time frame. SanDisk up over 18.5%. Seagate over 8% and here Western Digital was down by two and a half%. So clearly in a longer time frame, Western Digital did decouple from the others. But this is strong performance in the one-mon time frame for Micron. You can see if you compare it to its peers outside of the compute players which is down on the left which actually had a tremendous month. You see AMD up a 31% ARM up almost 24%. Qualcomm up over 23%. Intel close to a 40% gain over the last 30 days. Those were clearly the winners in the last 30 days. But you look at Meta over there from the hyperscalers. The clear winner there with their Muse AI that they launched. It has been a tremendous success for the company. If you've tried it, let me know. Drop it in the comments below. Let me know how you're using it, your thoughts on it. I just downloaded it the other day and connected it to my email and I'm starting to use it myself. But let's jump into the stories I want to talk about. The first one is this story from Goldman Sachs where it says the hyperscaler AI capex is rising 50% in 2027 to 1.2 trillion. This is a clear demand signal for the memory sector. It is a strong output signal. This commitment that we see from the hyperscalers will just drive more HBM, more DRAM, more nan, more HDD. It is a clear sign of strength for the memory sector overall. And if we go through the article, you can see they're saying it's set to increase by more than half to 1.2 trillion according to Goldman Sachs. The figure above the wall is is above the Wall Street consensus of 1.1 trillion in 2027. And to break even on their outlays, the companies would need uh annual artificial intelligence revenues of about 300 billion in the coming years just to break even on their investment overall. This will be a key piece that investors will continue to monitor not only with the hyperscalers but the spillover effect into the other sectors because if we don't see a break even if we don't see monetization of this of this investment it will have a negative impact not only on the sector on the the AI infrastructure buildout but it'll have a negative impact on the memory players as well and we all know that as we scroll down to the graph here you can see that hyperscaler capex now exceeds cash flow from operations increasing the need for debt and equity financing and potential constraints includes not only like I said the need to show monetization but we also see other potential constraints such as power labor memory because that's been the bottleneck now for a couple years as well as restrictions on data center construction so that local kind of push back we're seeing now let's even call it a more of a regional push back on data centers that we're starting to see those are definitely potential constraints but you can see on the graph here that I'm circling that hyperscaler capex it is set to rise. It is not slowing down. It is going to move higher. So that kind of throws a bit of cold water on some of the bears arguments that we're going to see a deescalation in some of the spending from the capex cap from the hyperscalers such as Microsoft, Google, Amazon, Meta and Oracle. It's clearly not going that way. They are staying committed to it. And as I mentioned, Goldman, they've updated their equity strategy models now forecasting that the top US cloud providers will increase their combined AI infrastructure spending by over 50% next year, reaching a 1.2 trillion by 2027. We have to think where that money ultimately will flow to like what companies and their balance sheets will that money flow to in 2027. Because we have clearly seen as compute power scales, the memory to compute ratio must rise in tandem to prevent severe processing bottlenecks. So you can buy all the fancy accelerators or the custom AS6 that you want, but without the massive memory bandwidth that is required and the massive highdensity storage tiers that you will need, those chips, they will sit idle waiting for data. So Goldman emphasizes this that the hyperscaler cap capex isn't just maintaining momentum. It's actually accelerating as major tech firms compete for sovereign AI dominance and enterprise cloud infrastructure. This creates a multi-year floor for DRAM and nan bit demand we'll see in the market. So it is a strong signal in my belief for the sector overall not just for Micron but for all the players in the memory sector. But when we do focus on HBM, take a look at this article. It actually surprised me. Maybe you knew it already, but it did surprise me the amount of HBM that is actually secured by just three companies through 2027. So you can see the article here. It says HBM bottleneck. Three tech companies have locked up 85% of the supply of AI's scarcest asset. You probably already guess what three they are, but you can see it here. It's actually Nvidia, Google or Alphabet and AMD. And if we scroll down to see what percentage of that allocation does each one each one of these three have already locked up. Nvidia has locked up the largest supply of HBM in 2027. They have estimated to be uh securing 37% of the capacity that we'll see in the market. With the company signing a $500 billion multi-year partnership with HBM leader SKH Heinix in June, it has also secured a significant volume of HBM supply in future years. It has also locked down the co-as capacity from TSMC and the advanced packaging technology, the advanced packaging technology essentially that stacks logic chips and HBM together for its GPUs and CPU units. Now Google, they're right behind them. They have 36% of the capacity locked up in 2027. And we know that Alphabet or Google is best known for their search capabilities, but the company has become a major force in the AI uh semiconductor space with their tensor processing units or their TPUs. It has secured 36% of the HBM allocation in 2027. and it will split the memory between its custom chips that are co-designed with their strategic partner in Broadcom and those that are co-designed with Meditech. You can scroll down. You can see here that uh Google is a complete AI company. We know that with its with its foundational model, but its TPU business is set to be its biggest growth driver for the company. That may surprise you as well. The fact that if you think about all the different business units that Google has, TPU, the TPU business unit is set to be the highest growth driver for the company. And the TPU sales philanthropic will provide a new high margin revenue stream for the company. And then finally, AMD. AMD is the last one. They have secured 12% of the HBM allocation in 2027. It's the third largest supply that we see in the market. And it's also is they've also supplied co-wash capacity for both their GPUs and CPUs. In March, it signed a long-term memory deal with Samsung to secure future future supply. And what we're seeing and the biggest sign that we've talked about in this channel before is that as as AMD scales up their new GPUs, their new server racks as well, the demand for memory in general, not just HBM, but memory in general is just exponentially uh growing. It's just escalating at a significant rate and you can see it in this paragraph here where their MI455XGPU it uses 50% more HBM than both its previous generations. And Nvidia's new Reuben GPU and AMD, they have said recently that it's that that it is feeling the HBM supply crunch as demand for their for its new Helios server has surpassed expectations. So you see the Helios server rack, we know the NVL72 rack from Nvidia is just driving up demand and just swallowing up all the capacity that we see in the marketplace. So it was surprising to me see that we have so much capacity that is just locked up with these three vendors overall. And real quickly I can show you why right here I put this graphic together to just highlight where all this memory is going across these three three suppliers, these three companies, Nvidia, Google, and AMD. We know the uh generations, the platforms, but if you just look down below at the total memory, it's the fifth line down, you can see the system configuration right above that. So the NVL72 rack, it's 20.7 terabytes of memory. Total memory for that rack in the Trillium Pod from Google, it takes up 14 to 16 terabytes of memory. And we know that the Instinct platform that rack for from AMD is a 2.3 terabytes of memory per server. So massive amounts of memory from all three of these companies as they start to build more sophisticated architecture in the marketplace. And guys, it's not stopping here. The architecture is just going to get more and more sophisticated. The demand for memory is going to get higher and higher as we grow further in the agentic phase. Just think about the the success of Muse from Meta. It's the number one downloaded app in the world right now and I think it has been for the last week. These personal assistants are only going to grow. I guarantee you OpenAI is going to be a fast follower. You're going to see Anthropic as a fast follower. Google, others will come out with similar personal assistance that will just drive up the demand for memory because they never stop. They're always processing tasks on behalf of their users. So great sign for the memory market, for the memory sector. I think this is going to cause a significant strength for Micron, for SanDisk, for SKH Highix, Western Digital, Seagate, and Samsung as well. And then let's finish the the video by talking about the big partnership that we saw today because it was announced earlier is this partnership between AAM and Anthropic. And you can see on Digi Times here it highlights that AAM plans to invest 5.5 billion into a cloud bill buildout after its 11.6 billion anthropic deal and this is a big deal for memory as well and I'm going to show you why in a moment but we go through some of the details for the partnership. So AAM as I mentioned they're planning to spend about five and a half billion building out cloud infrastructure to support the 11.6 6 billion7-year commitment from Anthropic as the US cloud provider expands memory procurement server hardware and distributed CPU capacity. So this expands the existing relationship between the two companies and they could grow by another 9 billion potentially bringing this total partnership the commitment between these two companies up to a 20 billion deal. So Anthropic will use AMA's distributed cloud infrastructure and software to support two things essentially their CPU workloads as well as their inference their push into inference as we move into that next phase of the super cycle and aime here underneath you can see the infrastructure spending become what the spending comes before revenue. So they are expected they expect about 1.7 billion of capital expenditure in the fourth quarter of this year to secure the critical supply chain components including memory. And let me say the big portion of this will actually be memory. So that's going to tighten the market even more than we see it today. And they'll use you can see the rest of their capex. They'll have another three billion planned for 2027 and then it scales down 700 million in 2028 essentially reaching that 5 a.5 billion mark and a has authorized they authorized their a partner in Jabel to produce to I mean excuse me to purchase this 1.7 billion of memory components under the existing service agreement. So together these two deals uh that deal as well as what AAM is going to do with Lenovo Global Technologies together the agreements point to a substantial increase in server hardware and memory procurement as the company expands its cloud infrastructure. So I mentioned this partnership and this announcement today is a strong sign for the memory sector. We are going to have some spillover into the memory sector. We'll have some upward momentum based on this partnership in the memory sector as well as we move forward. I think there's one other piece that I'll call out right here. It does say that the AAM agreement shows it just shows us how the the spending is spreading beyond the accelerator procurement. It's spreading now into CPU capacity, memory, contract manufacturing, server hardware, power, and distributed cloud infrastructure. And this builds on the story that we talked about earlier this week, how the major frontier labs like OpenA and and Anthropic, they're not only starting to negotiate directly with the memory suppliers, but we're seeing partnerships like this where they are bringing on new partners to build out cloud infrastructure and those partners will secure memory on their behalf as well. And it's just going to continue and continue to constrain this market for the years to come. So I think these are three great signs if you're a Micron investor, a SanDisk investor, a Western Digital Seagate, SKH Heinix or Samsung investor in the market. And then let's take a look at where we stand today. Not only with uh a I did want to look at this first and then we'll end on Micron. But AAM was up by you know a little over 3% today. Three and a half dollars. You can see about in the after hours 40 cents down. But take a look at the share price because based on this partnership, we're seeing a number of analysts including TD Cohen and others actually increase their their price target for Okam significantly. So it's trading at about 11394 today, but just look at the average price target we're seeing across all their analysts. They're covered by 12 25 analysts. 14 say buy. The consensus is a buy. The average price target, you can see on the right here, I'm circling it. It's $153.31. It's up, it's a 35% essentially upside from where the stock trades today. But look at TD Cohen. They dropped one today for $149. Just about a 31% upside. DAD Davidson dropped one for $185. A 62% upside for the stock. So guys, if you're looking to increase a different hold in your portfolio, again, make sure you do you you uh uh review the asset, you understand all the risks because you're the one who's going to be making the purchase. But this is a stock that I'm looking at and probably will add based on this price point because I think there's room to grow for a moving forward. But let's take a look at Micron just to see where it finished. You can see Micron great week up almost 7% this week, six and a half% like I mentioned. After hours, we're seeing a little more, another $3.72. The stock broke through the $1,100 mark a couple times this week. You see the intraday high today was $1,18.72. So, strong week. We are setting up for a maybe a couple strong days before we hit that September 30th when those earnings drop. I'm excited to see those earnings. I think they're going to be outstanding print that lands on the street that just blows us all away and continues to show us the strength for this company and for the sector overall. So that's my update for for today. I hope you guys uh enjoyed the the video took a few things away from it but from clearly for me we had a strong week strong momentum across the sector this week. We saw Micron, we saw, you know, SanDisk was pretty flat, but Seagate and Western Digital were up. But if we step back and look at that month time frame, we see significant growth not only for Micron and Sandis there as well, but we're seeing strong signs with macro capex, what Goldman Sachs is saying, and where we'll be 1.2 next year, 1.4 trillion in 2028. And we're seeing customers lock in memory. HBM is 85% of the allocation like I said is dominated by three companies next year. Just think about the constraints we're going to see with that advanced memory product. What it's going to do to the pricing power from the manufacturers as we move into next year and ultimately what we will do with the price of those stocks. Will we continue to see strong momentum? But next week is a massive week for us. But let's enjoy what we just saw this week. Strong week overall. Hope you guys were excited. Let me know what the comments in the comments below what your clear takeaways were for the week. Are there any other stories I missed or any questions you want to pose out there? Let's engage. Let's chat about it. But I hope you have a great Friday evening. I'll see you in the next