Google Just Confirmed the Memory Trade

Hey guys, welcome back. We have a packed video tonight because the market right now is actively trying to digest a mega cap tech company's earnings print that they dropped on the street and they're actually digesting it in an interesting way. It's hurting some companies. It's driving other sectors. I want to talk about that. I also want to dive into the signals that we saw today, the the green, the yellow, and the red, and what it could mean for the memory sector. So, we'll dive into all those stories, put them all together, show you what it means for the memory sector long-term overall, and then I want to give you a bonus signal at the end. Make sure you stay to the end of the video because I'm going to show you a company that's going to drop their earnings next week. And in the last eight times they've done this, there's been significant movement with the share price after their earnings. It's a company that we all know and track on this channel, very closely tied to the sector that we love. Actually, it's in the sector that we love. So, make sure you stay to the end because this could be a significant opportunity for you. It could be a significant opportunity for your portfolio as well. So, let's dive into the video tonight. Let's talk about what we saw in the market today. Before we do it though, make sure you hit like. Make sure you subscribe to the channel. Let's keep growing together. Let's keep this community. Let's see if we can get up over 39,000 members of the community tonight. So, if you value these videos, if you watch it and you learned something in the past and you haven't subscribed yet, just do me a favor. Take a moment and hit subscribe now. Appreciate you guys. Let's dive in and take a look at the green signals that I that at least in my opinion were green across today's market. The first thing I want to show you is Micron itself. Just take a look at the candle chart. Now, you might say, Kevin, Micron wasn't positive today. It was down by just over 1%. It was down by $11. And I would agree, but I would still counter and say it was a positive day. And let me tell you why. I was expecting a bit more profit taking today. I said it in the community last night after the massive run that we had yesterday over 12% over $100 a share. I just thought we would see some profit taking coming out of the gate, we would have a much uh kind of face a lot more pressure with Micron throughout the trading action today. And then I felt like that because of the not only the massive run but because of the Google print and the anxiety related to what will that print say? Will it confirm the sector? Will it put more pressure on the sector? I just thought all of those factors would drive Micron down a little bit today. And it tried right out of the gate. Take a look at that gap down. You can see here it jumped down right out of the gate of the opening bell, but then it kind of responded back. And as I was watching the stock, I got more and more encouraged because it just started to show this pattern of higher highs. If you look here, it hit a high of 976 and then 9 978 and then 983. So it looked like we're moving in these incremental steps and we were going to break through and have a positive day today, but then it just based it fell apart. It stalled out in the afternoon. You see it here just kind of scrolled down to about a low here of 964. Rallied back up and then the last 20 minutes just kind of gave way. I think this last 20 minutes was honestly just a bit of kind of profit taking at the end uh before the Google print hit the street. I think people just figured this this sector has been so volatile. It's we've made some run yesterday. Let's see if we can get some of our profit backs, put profit back, put some of that capital to the side and wait out this hyper all these hyperscaler earnings over the next couple of weeks. So that's what I what what my read on it today. But overall, it was a really tight sideways kind of consolidation. The candles are really tight. We didn't have any massive movements. It was actually just kind of oscillating between positive and negative throughout the day, hanging in that in that tight range until here, right at the end. But the RSI is still very much neutral. It's under 50 right now. It's just coiled. It's this stock is ready to jump with some massive news, something that can just be a catalyst for the sector. We did see it with Google's uh print today. If you take a look at Google, we'll walk through it real quickly. Now, the street didn't love the the street and Google investors. I don't know if they loved it because it was down by one and a quarter today during trading action. The stock was down by 3% in the after hours. But guys, we have to be honest. This was a a phenomenal print from this company. Take a look at earnings per share is at $9.11, just crushing what the estimates were. It's up 294% year-over-year for earnings per share. Revenue just smashed expectations. Almost 200 billion in revenue in the quarter. Expectations were 117 billion. just crushed it. If we scroll down, cloud growth. So, we mentioned last night that Google Cloud was going to be a critical thing for us to watch because it was a 63% expectation year-over-year for this segment of the business. They grew by 82%. About 25 billion in revenue in the space. So, investors love to see this because exactly what we've been looking for. We've been looking for for accelerating revenue with big tech in their cloud segments because it just proves or validates that customers are spending on these AI services. So it validates the capex and the and the hypers and the the AI infrastructure buildout. It validates the memory sector as well. So this was a very bullish sign for Micron and the other memory players. The one red flag though honestly is the negative free cash flow. It was down to about a negative 5.9 billion. We're going to get to it in a moment at the end of the video. This was the red flag overall. Capex came in as expected. It actually signaled for a little bit higher. They mentioned they thought we would see a little bit of an upward swing in capex. So, they did signal now that it could be between 195 to 205 billion for the year, but management also said they have a willingness to continue to invest and invest more in 2027 to build out the infrastructure. So, that's also a very positive sign for the memory trade. So, let's take a look. We know what it did for Google in the after hours, but what did it do for memory? Like, here we go. We see Micron was down, as I mentioned, over 1% today, over $11. In the after hours, we're up about 1 and a.5%. Now, this has been swinging. I'll be quite honest. I've seen this up close to 990 earlier. Now, it's down to about 973 a share. So, it's pulling back a little bit as we go further through the night. Keep our eye on it to see if we can maintain this momentum overnight and into the opening bell tomorrow. But clearly if you look across the sector, the street loved this print for the memory trade. Micron is up, SanDisk is up. You look to the right, they're up in the after hours. Western Digital is up, Seagate is up, and SKH Heinix is also up in the after hours right now. So those were strong signs. I want to give you one more green signal or a bullish sign for the sector today and it's based on this article. You see it on Tom's Hardware. The AD data chairman said that the DRAMM shortages will last another 10 years, dismisses the AI bubble talk until year 2040 2050. What I loved about this article, I want to call out a few things. It really resonated with me because first of all, Simon Ched said that the global DRAM shortage will run another 10 years and that any talk of an AI bubble right now is premature. He went on to say really reinforce the two big bottlenecks, two of the constraints that we talk about in the channel. the power wall and the memory wall. He said electricity, particularly green power and memory will be the world's two scarcest resources over the next decade. But what I love the next two paragraphs, he countered and said that AI applications will spread across businesses governments consumer markets, and that analysts who judge the cycle from a short-term capital spending or a single company's utilization rate, they underestimate the long-term demand. The next piece I love because we talk about it together on the channel that it's not just data centers anymore. We have to think beyond them. And Chen says beyond data centers. He pointed to robots, driverless vehicles, unmanned factories, unmanned factories and stores, smart homes, low earth orbit satellites, and a pool of edge devices that could reach tens of billions of units. That is a significant demand for uh for memory sector. This is a very bullish article overall for the sector. It's a bullish position that this chairman has and I think we're starting to see more and more people come to grips with the reality that this sector will be constrained for significantly long longer than we think and particularly when you look at all these other applications or opportunities for advanced memory moving forward. So those were strong green signals in my opinion today. If I look at one kind of yellow signal that's something we have to continue to monitor is it is this sitdown meeting that is confirmed right now for July 24th that'll happen in Silicon Valley. So what we are seeing is that Nvidia is going to sit down with Samsung SKH and neighbor their CEOs their chairmans in Silicon their chairman of those companies in Silicon Valley on the 24th. So Micron is not included in here. And this is why I want to focus on it and kind of track it as a yellow signal overall because if they're not included, does this mean that the relationship is is damaged or is it threatened at all with Nvidia? I don't think so. But let's dive in and talk and look at specifically what this is going to cover. So the other piece that's interesting is beyond just those companies I mentioned, there could be potential for the open AI CEO, the anthropic CEO, as well as some executives from Microsoft to attend this summit or this meeting. Now, those haven't been confirmed yet, and there hasn't been an agenda that's put out for this meeting yet, but we do know that the meeting could span the entire AI supply chain. as it mentions here that it could cut across these companies all focus on memory, AI processors, generative AI services, cloud infrastructure, and physical AI. So, you have the entire supply chain together. Unfortunately, Micron's not involved. I would have loved them to be involved, but they're not. The meeting could reinforce Nvidia's expanding ties with Korean companies as the South Korean South Korea in general moves beyond its traditional role as a memory supplier towards a broader position in the AI infrastructure. discussions as I mentioned they could cover AI data centers, AI factories, physical AI and with while company specific cooperation may range from next generation memory, foundry manufacturing to cloud capacity and robotics. Got to remember that Jensen met with the South Korean companies in June of this year. So this is kind of a follow-up meeting. In that first initial meeting, they discussed HBM4 supply schedules and volume. So SOCOM memory, foundry cooperation and joint development of future uh uh HBM generations. So this is a yellow signal for me. Like I mentioned, I just want to keep our eyes in track on it. I don't think it means that the there's a relation that there's a fractured relationship between Micron and Nvidia. We know that that fact that Micron is already validated for Nvidia's their Vera Rubin uh platform their ramp up. I think this is just the reality of this is it's this event. It is specifically a US South Korean bilateral AI summit. It's been this meeting is backed by the Korean trade initiatives to secure sovereign AI infrastructure domestic foundry commitments with Samsung and localized data center projects with neighbor. So Samsung and SKX they control the dominant share of global HBM manufacturing capacity. So making direct executive alignment is critical for them to meet with Nvidia and Jensen to talk about the Vera Rubin shipments. It doesn't mean that Micron is out of the relationship. We know they've already been qualified. Their HBM4 has already been qualified. They're ramping up. They're ahead of schedule. Micron's already booked a billion dollars in HBM revenue. But I keep this yellow because I think it just shows us how aggressive the South Korean competitors are when they're looking to kind of secure and lock up that HBM4 supply agreements and the advanced capacity agreements there. The cap capacity agreements because they're meeting so often and so frequently with Jensen. Micron remains on track though as I mentioned with their HBM4 ramps and their Vera Rubin design wins. exclusion from these top level strategic roundts though they do signal that the next generation that the battle for the next generation memory market share among these competitors these three big companies it is just tightening it'll continue to tighten as we move forward overall but this is why I keep it as a yellow this is interesting like I said I would have loved to seen Micron included here but then we jump to the red signal that we have today the one I want to go through is is jump back to Google because I mentioned it it's all around their free cash flow. If we take a look at their cloud business, significant jump, right? Went from 13 to 25 billion essentially 82% growth year-over-year. If we jump in over the the capex, you see the scale up that they have for capex going from second quarter last year to the second quarter of this year. Essentially doubling their capex commitment and the impact that that's having on free cash flow. If you take a look at that third line there, you see the cash free cash flow for this quarter went down to 5.9 billion. A negative hit of 5.9 billion. And compare that to the prior quarters. You know, they were up in free cash flow of 24 uh billion in the third and fourth quarter of last year. 10 billion. So, you're seeing the impact of the data center buildout. This free cash flow of minus 5.9 billion. Just think about the scale of that because Google had an operating cash flow of 39 billion in the quarter but their capex was just under 49 45 billion to fund these AI data centers. So that's why we're seeing this big hit. The reality here and why I have it as a red signal is that hyperscalers are burning cash faster than they are generating it from their operations. They're relying on massive equity raises and debt issuances to fund these component purchases. If Wall Street begins to demand immediate cash flow discipline before the enterprise AI monetization can fully mature or they force reduction or a pause in or we see any forced reduction or a pause in quarterly hyperscaler capex, it will have a significant impact on the memory sector. It could trigger a severe sudden overupp and the enterprise SSD. So this is something we have to keep our eye on overall. This is the red flag for me for today. And then I think the piece that we need to the outlook for next week or excuse me not for next week but for tomorrow will be the key event is the Intel earnings. So as I look across the signals today we see the green signals obviously that cloud expansion 82%. the the comments that we had from the A data chairman around the super cycle that it's intact for the next 10 years that we're going to see this demand expansion into many other areas outside of data centers. We know we have this yellow signal I went through which is the Nvidia sitdown. The red signal which is this hyperscaler cash burn that we have to keep our eye on. My fear there is investors may start to put pressure may start to be concerned about the negative free cash flow and that and that return on capital that that uh they're not seeing if they're not bought into the the AI infrastructure buildout and they don't have the vision for that down the road they might put pressure on the companies overall and then the piece down here in blue the key event tomorrow is the Intel's earnings it is going to be a catalyst for the memory sector just like Google was today the Xeon platform outlook the server server demand, the enterprise buildouts. They will reveal if server DRM contract pricing momentum can hold through the second half of this year. So keep your eye on that uh earnings that'll drop after the close tomorrow. But again, to me, I think today's read was decisively green based on the stories today. Didn't see a strong price movement with Micron, but we're seeing it in the after hours right now. Let's see if we can continue to carry that momentum into the opening bell tomorrow. And now I want to jump over and give you the bonus signal and it's all related to the HDD players, the titans that we don't talk about enough on this channel. So Western Digital and Seagate, but more particularly Seagate. First thing I want to show you is that AI data center demand. It revives HDDs. We're starting to see that high disk drives are regaining attention as AI data center operators seek cost-effective high-capacity storage to support the rapidly growing data volumes. The Japanese component makers are all expanding production capacity to help drive the HDD build up more supply in the market. We know that the HDD the global supply or the global market is dominated by three companies. Western Digital, Seagate, and Toshiba. Western Digital and Seagate. They have 80% of the market. They have a race towards that 100 terabyte hammer device. Seagate's probably a little ahead of Western Digital, but we'll see. Western Digital is expecting to be there by 2029. I think Seagate will beat them there. They're enabling their 100 terabit drives by increasing their per platter capacity. But the other piece I want to get to before I show you the signals, HD prices, they're rising by 10% quarter over quarter this quarter. And hyperscalers are absolutely absorbing every bit of supply. 60% of the near-term shipments are going to hyperscalers like Google and Amazon. But let's talk about the signal. Seagate has their earnings next week on Tuesday on the 28th. the stock may move 13% according to uh Bloomberg. It's all based on the the volatility that we've seen in the past. The expected move could be 13% based on these earnings. And if you look at what we did over what Seagate did over the last eight earnings, I'm going to show you that history. I had this picture put together to make it easier for us to see, but you can see Seagate earnings next week. Big move opportunity. If you look on the last eight on the right, you'll see six of the eight, they significantly outpace the implied move. You know, that's those the green arrows, the beat implied. Just look at last April, the expected move was supposed to be 9.8%. They actually moved by 19%. The earnings before that in January, expected move 9.6%, the stock moved by 35%. So this earnings next week, the expected move right now, it's pricing in a 13% move. one way or the other. The question is, will Cay continue to outperform like it has done in history? And will the stock even move higher than the expected move? If it does, it creates a great investment opportunity for each and every one of us on the channel. Could be a great investment opportunity for our portfolio overall. So, that's the bonus signal I wanted to give you in today's video. Hope you guys like that piece. But I think if to wrap everything up and put a package on of what we talked about today, decisively green day for me because of what we're seeing in the price movement, how Micron just held its ground and didn't give up more of that massive growth that we had on Tuesday. But we're also seeing this DRAM, the pricing fundamentals, the demand fundamentals that are in place based on those comments that we're seeing from the ADA chairman. We're seeing kind of h the hyperscaler capex. It is getting I think we're going to be that's going to come under some more tightness. We see commitments from Google not only in this quarter but their willingness to spend more. But the question I have is how will investors interpret that? How will investors interpret the negative free cash flow we may see with these hyperscalers? Will they put pressure on it overall? Something for us to keep our eye on. Also want to keep our eye on that sitdown in Silicon Valley and what type of relationships come out of that? What type of agreements come out of that? and how can Micron keep pace with SKH Heinix and Samsung moving forward. Finally, keep your eyes on the Intel print that drops tomorrow when the market close. That's going to be a catalyst for this sector. There's so many things we can talk about tomorrow in tomorrow night's video around that. And then keep your eye on that big opportunity next week for Seagate. If it's right for you, if it fits into your kind of disciplined approach to investing, it could be a great opportunity to to to invest into it with the massive moves. If history continues to repeat itself, at least it could be a significant swing there with Seagate after they drop their earnings next week. So guys, that's all I have tonight. I hope you enjoyed the video. Let me know below. Drop your comments. Let me know your thoughts. And if you haven't done it already, make sure you subscribe to the channel. See you soon, guys. 7.