The Biggest Mistake Micron Bears Are Making

Hey guys, welcome back to the channel. It is a nice day here in Dallas. I hope you guys are enjoying yourself as well. Today's focus is obviously going to be on the bear narrative that is out there for Micron. Because as I was doing a bunch of research, the one thing that is obvious is that this tech trade, as many articles will mention, is a very crowded trade. What I noticed is looking through YouTube is the memory space, the number of creators that have opinions in the space. It is a very crowded content trade as well. And there is a lot of bearish headlines and stories out there regarding the memory sector. And I'm not saying any of them are wrong. They're not They're sharing their opinion. They're looking at fundamentals like I am. They're looking at chart analysis as well in this sector. And they're having their opinion and saying that we could see a fundamental drop. I've seen a number of analysts, a number of YouTube creators, excuse me, that are saying Micron is going to drop 75% in the next 12 months. I don't have a crystal ball, nor do they. We very well could see a significant pullback. But 75% drop in the next 12 months based on everything we see in the market right now, where the innovation is going, where the agentic phase is going, I just think is an absolutely flawed thesis to come up with. Again, I don't have a crystal ball. I can admit that I'm very well open to say that I very well could be wrong in this sector. Let me ask you a question. On all the bearish analysts that you've seen, and I've watched their videos as well, how often will they sit there and say, I could be wrong when I'm showing you this? I don't see that. I see them just with strong conviction showing head and shoulder patterns, showing where the breakdowns have been in the past, looking back at 2018, 2021 cycles for the memory sector, and definitively telling you that this stock is going to drop to $250 in 12 months without any humility of saying I could be wrong. Guys, I very well could be wrong in my belief as well. I just don't think we're going to see that level of drop. I think we're going to see strong support for Micron, particularly as we move forward, based on everything that is in the market right now. Not just Micron, but the memory sector. All of the fundamentals are pointing to strength for this sector. How the market is evolving, where we're moving to with the agentic phase, robotics, autonomous vehicles, everything we've talked about. I just don't see a stock dropping that dramatically. Look, Micron is at a $1.1 trillion valuation right now. If it dropped back down as far as $300 a share, would we start to think that Micron, a company like Micron with everything that's in surrounding it in the marketplace, all of the demand that we see, all of the buildout, all of the investment from the hyperscalers and all the companies around them, a stock like Micron and a company like Micron's going to be evaluated is going to be evaluated at 300 million? I just don't see that happening. I think that's fundamentally a a flawed thesis overall. And that's what I want to focus today's video on. Because when you see a chorus of creators claiming that we're going to see a drop in Micron of 75% based on what they're seeing, that it's going to drop through 750, 450, down to 250, guys, frankly, it can be panicking. If you hold Micron or any other member of the Fab Five in your portfolio, I can understand how this could be terrifying and create anxiety. So today we're going to do something a little different. We're going to dive into the chart. I'm going to break down the levels of support that these the chartists are saying we're going to break through, and I'm going to give you exactly when it happened, why they're mentioning that. I'm also going to break down some of the fundamentals that we see in the market right now, and why I fundamentally believe that this is a structurally different cycle. I'm going to show you what's happening in the market, what I'm basing my evidence on for my thesis that Micron will stay strong, and it will grow to reach the $1,500 price target level by the end of the year. I still have conviction for that. I still have conviction for this sector overall. So, that's what we're going to break through in today's video. If you haven't done it already though, make sure you hit like. Make sure you subscribe to the channel. Guys, let's get started. First, let's talk about the stock we're going to base this video on. It's going to be obviously based on Micron. As you can see, Micron closed at 921, we'll call it, at the end of the day on Friday, down about 7% in the after hours, we're down another 1% at 9 called 911 right now. Let's pull up the the candle pattern chart that I see all of the bears kind of basing their their thesis on of why this stock is going to drop all the way down. Now, I've taken the liberty, what you're looking at is a one-day candle chart that goes back essentially to the fourth quarter of 20 of 2025 to where we are today. And I've drawn this blue kind of diagonal ascending line from where we saw the most recent low, which was just at the end of March right here. You see, this is March 31st. This was, if you remember, after the earnings came out on March 17th, that drop that we saw where it rallied down and ended up at about 340 a share here. Just under 340 a share. And then we saw a significant rally. Now, I'm not going to draw my ascending line all the way to the top, the all-time high we had here, which was 1255 a share. Instead, I'm going to draw it through the most recent high that we've had here, where we crested or where we broke through that $1,000 level again. So, that's the blue ascending line. And what first thing I would say is the chartists or the bears in this case, I would say is that they'll look at this pattern and they'll say that Micron stayed above that ascending trending line very nicely all the way through until we had a breakdown. Where we had, you know, a breakdown where it crossed back over the the level essentially right here first, which was right around the beginning of July, July 8th, where we crossed back down through, closed at 948 a share here, had a bit of a rally, but then we crossed down again. So, they're going to say we have lower lows. If you look at the chart, you'll see a lower low that we get to here with this candle, this candle, and essentially this candle. And in theory, these lower lows for them is a pattern that this stock is going to keep falling down. If we look at the support levels, the first breakdown level that I have, and I see I spelled it wrong there, but breakdown level number one is 850. So, the stock is at 921 essentially a share right now. The chartists are arguing that since this breakdown here on July 17th, it crossed down to a new low that the stock has to push back down to test the support level again. It very well could. Next week is a volatile week. This is about a 9% drop from where the stock sits today. That is right in range with what we have seen. We've seen a 7% drop on Friday. We had a 10% drop. We had a 10% gain. So, the stock is definitely it's volatile. It's a high beta stock and moves in in strong ways one way or the other. So, this is the first breakdown level that we say the support level. What I've heard the chartists say is once we break through this level, that the stock will push down to the next level of support, which is that 750 range right here. Now, this represents the consolidation floor that we saw probably right before summer. It's May 22nd here. This was the you know, right before Micron pushed it did that push to the thousand-dollar level here. So, the bear logic here is straightforward. They the creators or the chartists will say they argue that when a stock experiences a vertical rally like we've seen with Micron, it leaves a unfilled price gap and it stretches the moving averages. A pullback to 750 would simply be a standard 20% technical correction to test prior resistance as a new support. Now, I'm not saying we what we couldn't see that. And again, I don't have a crystal ball. With all the volatility we see this week, we know how dependent the share price is not only on we're going to see SK Hynix and Seagate members of their own kind of fab five, the memory titans report next week, but all the hyperscalers could shift this stock exponentially up or could put pressure on it moving down. A 20% test down to 750, guys, I'm going to be honest is a very logical outcome that could happen next week. And that's kind of the theory for the bears or the chartists. But what they say there is the stock will just has to keep pushing down to fill to those next gap to fill in the next gaps or find the next level of breakdown overall. And that takes me down to breakdown level three here is what we saw back in April 21st, the four kind of 50 level. This was the multi-month supply ceiling before we saw the blowout earnings that forced the short sellers to cover and trigger it triggered a massive institutional breakout for Micron. The classic chart theory here, it dictates that major that this major month breakout that the base had before we started it, it has to be retested. So to the bears or to the chartists, a drop to 450 represents it represents a 50% decline from where the stock level trades today overall, which conveniently matches the average severe severity of traditional memory downturns that we've seen in past decades. And finally, I've got a couple other breakdown levels because I've seen so many chartists that say it just has to keep going down. Once it gets through 450, it'll keep moving down to 340. It ultimately will keep moving down to the 250. The 340 breakdown level four, that's what we saw at the end of March as I mentioned, right after the earnings. That's kind of the the nadir that I'm basing that ascending trend line on. But they're arguing that we're going to see a 75% collapse in the next 12 months. That would take Micron stock down to 250 a share, which essentially where where be back here in December. Like where we closed right at the end of the year in December overall. So that's what I'm seeing a ton of people argue. It's the it was the valuation floor for the stock back at the end of 2025. And guys, we have to remember during this window, high-bandwidth memory was still ramping up and enterprise server DRAM contract prices were a fraction of where they sit today in the market. Chartists will look at past memory cycles like we saw in 2018 and we saw post-COVID in 2021, that correction, and they'll claim that every single time Micron hits a peak or reaches a peak gross margin that the stock drops 75% back to the multi-year baseline. And on paper, that chart logic looks clean. It looks methodological methodical, excuse me, but there are fundamental flaws in my opinion. Charts measure past price action, not future structural constraints overall. And this is where I think we need to pause and ask ourselves as a community a critical question. Why is pure technical analysis not a crystal ball? None of us have a crystal balls, I mentioned. The chartists, they do a great job explaining this and they have strong conviction in their belief that the stock is going to go down to 250. I have equal conviction based on everything I see in the environment that the stock is going to be stable and move up to the price target of of 1500. But reality, no one knows which one of us is all right. So you have to look at the evidence and you have to make the best decision for you. But my belief is that technical analysis is an excellent tool for market psychology, for sentiment, for liquidity flow, and it works well in a stable, mature industry with predictable, repeating supply and demand loops. But technical analysis has massive blind spots uh during a structural regime regime shift like we're seeing in the market today. Moments in history when it it when an industry's underlying economics fundamentally change, like we see with the memory sector today, it is so different than 2020 2018 and 2021. This is where I think technical chart analysis is just going to struggle overall because it cannot predict the type of structural changes that we're seeing in the market right now. For example, moving averages completely ignore the multi-year legally binding agreements that we're seeing in the market. Historical patterns, they assume that the company's product mix remains 100% the same that it did back in the past, totally ignoring innovation in market dynamics that we're seeing in today's market. Try to imagine evaluating Amazon back in 1998 based on the the historical patterns and projecting that the stock would fall. Try imagine doing the same with Apple in 2027 and base their valuation or their movement on the phone sector. But better yet, let me pull up another chart because I think there's a more real-life examples. Take a look at Nvidia. Nvidia is a very good example cuz if we look back in the 2024 timeframe, which I think is right around here, the stock was trading you could see it about 92, jumped up here to about 125, 130 a share. Take a look at the head and shoulder patterns that we see on this stock as well. And what the chartists were claiming here is that this stock, when it broke, had to break back down to the $80 a share level. They were sure just as sure about Nvidia back then as they are about Micron today. They said, "Look at these head and shoulder patterns." They predicted that Nvidia would collapse back towards the $80 level. But what happened? The generative AI tipping point arrived in the market. Enterprise demand for the A100 and the H100 GPUs, it absolutely exploded. And that fundamental demand, that shift renders historical chart patterns absolutely obsolete. Anyone who sold Micron at that 160 level waiting for a retest back down to 80 missed one of the greatest technological rallies in stock market market history. And in my opinion guys, the chartists are making the same exact mistake with Micron today by treating current market dynamics and by treating Micron as if they are still selling basic PC RAM like they did in 2018. So let's jump over and take a look at some of the fundamentals that I mentioned and what I'm tracking overall and what gives me just gives me kind of a a conviction in the marketplace first. I want to talk about the first thing which is just there's a few factors let's say. There's there's the great wafer consumption, there's the HBM kind of rally that we're seeing in the market, the architectural the new architectures that are being put out by AMD and Nvidia and others and what that's going to drive. And then ultimately the agreements that we're seeing, you know, the shift away from spot pricing. So let's talk about those fundamentals at the end and let me jump over and first just talk about kind of the wafer consumption. And let me change this so you can see it cuz this is a big piece in the market today. Well, you know, when you take a look at high bandwidth memory, it just consumes wafers at a significantly higher rate than DRAM. If you look at the what you're seeing in graphic on your on your screen, in the past when you had a 100 wafers and you were building traditional DRAM, you would get 100 units of supply of that product. HBM has significantly the yields are different. The consumption of wafers are different. You take those same 100 wafers, you're getting 30 to 35 equivalent units supply. So it is just consuming wafers overall and that's what's putting the pressure that we see in the marketplace on DRAM historical DRAM products. So that's the first piece that HBM is just driving so much consumption of wafers in the market overall. And I think if we shift to the new architecture, everything we talked about, just look what AMD is building. So, AMD right now they came out with their Helios, we talked about it, and they're advancing AI platform. But look at Helios in general. I'm going to go through some of the dynamics of it just to show you the amount of memory requirements that it has. But I love this part cuz it starts to show you if you look at training flops increasing 5x every year from 2020. But look at the inference, the shift in inference. This is a part of it, in my opinion, where we're seeing in the market. We're moving from training, we're moving into inference, and just look at from 2024 to 2026. That balance between training and inference. Inference is the bigger piece of the pie now. It's going to continue to be that way. And then we're going to get out into the edge world as well. This is just one part of the story. But take a look at the two big rack kind of architectures. You have Nvidia's NDL 72 against AMD's new Helios with their their MI 455X accelerator. I want you to just look at the demand that both of these have for memory overall. So, both have 72 GPUs, whether they're the MI 455X or it's a Vera Rubin a Vera Rubin GPU. Look at the demand for HBM. 31 terabytes versus we'll call 20 21 terabytes. And it's a 50% more HBM capacity with AMD's their new Helios rack. 50% more scale-out bandwidth for memory overall, too. Guys, 43 terabytes a second scale-out bandwidth, 28.6 second terabytes per second scale-out bandwidth with both of these. This is today. Imagine where we're going in the future, the requirements that we're going to need for HBM, for DRAM, for SSDs, everything across the market. And this is why I believe you cannot look at a chart from 2018, from 2021, and predict that we're going to see the same exact drop of 75%. The market has changed, the product mix has changed, innovation has changed. You have to be intellectually honest and and and you can't ignore those dynamics in the marketplace. That's my opinion. If we jump over also, just think about this. We saw this announcement last night. I talked about it. SK Hynix and Nvidia, they're striking a long-term deal for HBM. A few details, it's a $500 billion deal spanning AI factory construction, next-generation memory supply. They're going to drive next-generation memory solutions, including high-bandwidth memory to support workloads ranging from large language model training to physical AI applications. It's a 2-gigawatt AI factory using Nvidia's DSX platform and Vera Rubin accelerators powered by SK Hynix HBM2 chips. Think about where that's going to push the innovation in the market. These two massive companies partnering together to build out more innovative products. Again, to me it builds the fundamental story for memory into the marketplace. And then think about also, I love this deal. This is we showed it earlier, but this is Micron kind of thinking ahead how strategically smart it is for the company. We know the wafer consumption for HBM compared to to DDR5, the DRAM products, how much it eats up. I love when Micron signed a 10-year supply agreement with Global Foundries, $500 million to secure their supply for the next 10 years to ensure that they can meet this demand in the marketplace. So again, for Micron, such a smart move for the company, recognizing the shortages we could see in the marketplace. Wafer could be the next bottleneck in the marketplace, and Micron has already taken steps to ensure they have supply. And then finally, it's the long-term agreements that we've talked about. We know that Micron has signed, if I scroll down, they've signed, you know, uh 16 strategic agreements, probably more at this point. We'll see what they announce at their earnings in September. But, these contracts cover 20 to 20 to 20% of DRAM volume, a third of NAND volume. We know their HBM supply is locked up through 2027. Very different marketplace than we saw in the past. We're moving away from spot pricing into these binding, legally binding contracts where they have revenues of visibility stretching out for years. 14 of these contracts represent approximately 100 billion in minimal contracted revenues over the remaining contract term. We know they've already had a 22 billion in cash deposits. So, this is giving strong kind of visibility, revenue visibility for the company overall. But, those are the fundamentals that I see in the marketplace. You're seeing wafers being consumed at an unprecedented rate. You're seeing the demand for HBM memory go crazy. New architectures are driving more and more demand for for HBM and advanced memory. The shift into genetic, the shift to edge ultimately will expand memory demand exponentially, as well. And, we're seeing long-term agreements with the hyperscalers. That these contracts, as you know, they have a take it or take it or pay clause that essentially is giving guaranteed binding revenue for the memory manufacturers. Very different than we've seen in the past. And, when we did have a boom and bust cycle, the dynamics in there, these are completely different cycles right now. So, if we bring it all together in the close, could Micron drop to 850, 750 next week? Could it test those support levels? Of course, it could. It absolutely could happen. We have a volatile week ahead of us next week with the hyperscaler earnings. If capex slows down, if HBM yields disappoint the marketplace, if the AI infrastructure demand ultimately proves weaker than we expected, the stock could experience a deep correction. I've got to be honest with that. I don't have a crystal ball, but everything that I see in the marketplace to me shows a strong demand. It shows a structural shift, and it's very different than the 2018, the 2021 cycle that the chartists are looking at right now. Plus, we know that these are high beta stocks, these semiconductor stocks. They do experience volatility. They experience algorithmic algorithmic driven sell-offs, and they experience profit taking after the massive rallies that we've seen. So, short-term pullbacks, like we're seeing right now, are completely normal, and they're actually a very healthy part of a market cycle. Those are real risks that investors should monitor. But, it's a very different argument than saying that the stock must repeat a 2018 cycle simply because the chart pattern looks very similar looks very similar. So, in my view, the fundamental thesis for Micron and for the broader memory structure, it still remains structurally intact. And of course, I could be wrong. I'm vulnerable and and and humble enough to say that. However, I believe that the charts what the chartists and what the charts show us is where the stock has been. On the other hand, the fundamentals and the innovation that we consistently talk about in this channel, that tells us where the industry is moving to. And when those two disagree, that's where the biggest opportunities and frankly, where the biggest mistakes can be made for investors. So guys, I hope you like this deep dive deep dive overview. I hope you found it helpful, and if you learned something, make sure you hit like, make sure you subscribe to the channel. Guys, I'll see you in the next one.