*Holy Smokes! Complete Stock Market BLOWOUT - PREPARE [MOON]!*

Summary

The video discusses Micron's impressive AI revenue, contributing significantly to the US GDP, estimated at around 4%. Despite past struggles, Micron's current performance is robust, with high demand for AI server chips. However, there are warnings about potential oversupply and competition in the future. Additionally, China's efforts to stabilize its economy include measures to control housing prices and stimulate consumer spending, which has positive implications for the market.

Takeaways

• ?Í🏼 Micron's AI revenue is contributing significantly to the market, sending it to new highs.
• 💲 Artificial Intelligence (AI) is projected to contribute around $100 billion to the US GDP in 2024, which is about 4% of the total $24 trillion economy.
• 💵 Despite previous losses, Micron's current financial standing is robust, with excellent margins due to high demand for their AI server and data center products.
• 💲 Micron's high bandwidth memory products for AI are reportedly sold out through 2024 and 2025, indicating strong and sustained demand.
• 💵 The company's gross margin has seen a significant increase, jumping almost 9 percentage points in a single quarter.
• 💲 Micron's earnings have exceeded expectations, with better-than-anticipated EPS and revenue guidance.
• 🔨 There's a warning from Micron about potential oversupply and increased competition which could affect margins and pricing in the future.
• 💵 Capital expenditures are high for Micron as they invest in manufacturing capabilities to meet demand, resulting in minimal free cash flow.
• 💲 The company's balance sheet is stable, with sufficient cash and short-term investments to cover debt obligations.
• 💵 There's a broader market optimism due to China's economic policies aimed at stabilizing housing prices and increasing consumer spending.
• 💲 Despite positive market trends, there's a noted concern about potential recession signs, such as government payroll peaking, consumer loan delinquencies, and personal savings rate decline.

Q & A

What is the estimated contribution of artificial intelligence to the United States GDP in 2024?

Artificial intelligence is estimated to contribute around $100 billion to the United States GDP in 2024.

What percentage of the total GDP does the estimated AI contribution represent?

The AI contribution represents about 4% of the total GDP in the context of a $24 trillion economy.

What is the current GDP growth rate according to the Atlanta Fed?

The Atlanta Fed thinks that the GDP growth rate is sitting at 2.9%.

How did Micron perform financially in the same quarter last year?

Micron lost $1.4 billion in the same quarter last year due to a downturn in the memory market.

What was Micron's gross margin in the quarter discussed in the script?

Micron's gross margin for the quarter was 35.3%, which is a significant increase from the previous quarter.

What does Micron's high demand and limited supply suggest about their current market position?

Micron's high demand and limited supply suggest they are currently able to maintain high margins due to the lack of competition and strong market position.

What is the warning Micron gave regarding their future performance?

Micron warned that as supply ramps up, there is a risk of price collapses and competition could erode their margins, potentially leading to excess supply.

What is the current status of Micron's free cash flow?

Micron's free cash flow is relatively low, with expenditures for plant, property, and equipment significantly outpacing incoming cash flow.

What actions is China considering to stabilize their economy according to the script?

China is considering measures such as stopping the oversupply of new construction and planning additional fiscal spending to support consumers, amounting to about $284 billion.

What are some of the leading indicators suggesting a potential recession as mentioned in the script?

Some leading indicators suggesting a potential recession include the inversion of the 10-year and 2-year treasury yields, peaking of government payrolls, delinquencies in consumer loans, decline in personal savings rate, and construction job openings rapidly falling.

What is the current status of Micron's balance sheet according to the script?

Micron's balance sheet is acceptable, with enough cash and short-term investments to cover short-term debt, and sufficient receivables and inventories to cover long-term debt if sold at full price.

Outlines

00:00

📈 Micron's AI Revenue and GDP Impact

The speaker begins by discussing the impressive performance of Micron's artificial intelligence revenue, which is contributing significantly to the GDP. It's highlighted that AI is estimated to contribute around $100 billion to the US GDP in 2024, which is about 4% of the total $24 trillion economy. The speaker also mentions that the Atlanta Fed's current GDP estimate is at 2.9%, which is above trend growth, potentially influenced by AI. Despite this positive news, there's a warning about future competition and the cyclical nature of Micron's business, which experienced a loss of $1.4 billion in the same quarter of the previous year due to a poor memory market. Currently, Micron's margins are excellent, with high demand for their AI server and data center products, which are sold out for 2024 and 2025.

05:03

💹 Micron's Financial Performance and Warnings

The speaker continues by detailing Micron's financial performance, noting that they have beaten expectations on EPS and revenue guidance. They discuss the company's strong guidance for the next quarter, with expectations of continued server demand, particularly for AI servers. The speaker also reads sections from Micron's earnings call, indicating confidence in their product demand and ability to ramp up production. However, a warning is issued about potential oversupply and competition, which could lead to price collapses and reduced margins. The company is investing heavily in capital expenditure, resulting in minimal free cash flow. Despite this, their balance sheet is considered healthy, with enough cash and receivables to cover debts. The risks identified include over-spending, collapsing chip market prices, and competition eroding margins.

10:03

🏢 China's Economic Measures and Market Outlook

In the final paragraph, the speaker shifts focus to China's economic measures, discussing efforts to stop the fall of home prices and reduce oversupply in new construction. China is also considering additional fiscal spending to support consumers, amounting to about $284 billion. This has been positively received by the market, with stocks like oil showing an upward trend. The speaker also touches on various economic indicators, expressing concern about potential recession signs, such as delinquencies in consumer loans, a decline in personal savings rate, and other economic data points. Despite these concerns, the speaker notes that the market's short-term euphoria continues, encouraging viewers to make profits and remain vigilant.

Keywords

💡Micron

Micron is a leading American manufacturer of computer memory and semiconductor components. In the context of the video, Micron's financial performance and their role in the AI market are discussed, highlighting their recent earnings report which has positively impacted the market. The script mentions Micron's significant contribution to the GDP through their AI-related products, indicating their importance in the tech industry.

💡Artificial Intelligence (AI)

Artificial Intelligence refers to the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions. The video script discusses AI's contribution to the GDP, with an estimated $100 billion impact on the US GDP alone in 2024. AI is highlighted as a significant driver of economic growth, especially in sectors like data centers and cloud computing.

💡Gross Margin

Gross Margin is a financial metric that reflects the amount of profit a company makes after deducting the cost of goods sold (COGS) from net sales. In the script, Micron's gross margin is discussed as an indicator of their financial health, with a significant increase from the previous year, demonstrating their profitability and efficiency in production.

💡Supply and Demand

Supply and Demand are economic concepts that describe the relationship between the quantity of a product that producers wish to sell and the quantity that consumers are willing to buy. The video mentions that Micron's products, particularly those related to AI, are in high demand and have limited supply, leading to high gross margins. This situation is beneficial for the company but could change if supply increases or demand decreases.

💡CapEx (Capital Expenditure)

Capital Expenditure refers to funds used by a company to acquire or upgrade physical assets such as buildings, industrial plants, technology, or equipment. The script discusses Micron's significant investment in CapEx to increase production capacity, which is crucial for meeting the high demand for their AI-related products.

💡Free Cash Flow

Free Cash Flow is the cash a company generates after accounting for capital expenditures. It is an important indicator of a company's financial health. The video script points out that Micron's free cash flow is relatively low, which might be a concern for potential investors, as it indicates that the company is not generating substantial cash surplus after reinvesting in its business.

💡GDP (Gross Domestic Product)

Gross Domestic Product is the total value of goods and services produced in a country over a specific period. The video script discusses the contribution of AI to the US GDP, emphasizing the economic significance of the technology sector. It also compares AI's contribution to the overall economy, showing its impact on economic growth.

💡Consumer Spending

Consumer Spending refers to the amount of money consumers spend on goods and services. In the video, consumer spending is mentioned as a significant contributor to GDP, highlighting the importance of consumer behavior in driving economic growth.

💡Recession

A Recession is a period of negative economic growth that lasts for at least two consecutive quarters. The video script discusses various economic indicators that suggest the possibility of a recession, such as declining consumer spending, rising unemployment claims, and falling construction spending. These indicators are contrasted with the positive impact of AI on the economy.

💡Earnings Call

An Earnings Call is a conference call between a public company's executives and financial analysts to discuss the company's financial results. The video script references sections from Micron's earnings call, where company executives express optimism about future demand for their products and discuss their financial performance.

💡Cyclicality

Cyclicality refers to the tendency of a business or industry to experience periodic rises and falls in demand. The script mentions Micron as a cyclical company, experiencing extreme boom and bust cycles, which is evident from their financial performance in the past year, moving from significant losses to substantial profits.

Highlights

Micron's artificial intelligence revenue is sending the market to new highs.

AI is estimated to contribute around $100 billion to the US GDP in 2024.

AI's contribution to GDP is about 4%, which could be the difference between positive or negative growth.

The Atlanta Fed thinks the current GDP is sitting at 2.9%, which is above trend growth.

Micron is a cyclical company experiencing rapid boom and bust cycles.

Micron lost $1.4 billion last year due to a poor memory market.

Micron's high bandwidth memory products for AI servers and data centers are sold out for 2024 and 2025.

Micron's gross margin for this quarter is 35.3%, a significant increase from last quarter.

Micron beat EPS guidance by 14% and Revenue guidance by 5% in this quarter.

Micron expects server demand, especially for AI servers, to continue to be strong.

Cloud and Enterprise AI servers are driving the extra demand for Micron's products.

Micron warns that competition could increase and affect their high margins.

Micron is investing heavily in capex to continue manufacturing more products.

Micron's free cash flow is low, but their balance sheet is acceptable.

China is trying to stop the fall of home prices and oversupply of new construction.

China is planning additional fiscal spending to help the consumer economy.

AI can boom, but a recession is still possible.

Various economic indicators suggest a potential recession could be near.

Despite potential economic downturns, the short-term market euphoria can continue.

Transcripts

well holy smokes everyone this is a game

Cher in terms of what we just saw on

micron's artificial intelligence revenue

and what it means for GDP as well as

what we just heard from China but let's

start right at the top also small note

I'm at an event so I'm only going to be

able to go live for the market open live

stream for a few minutes today so we can

hit the Q2 GDP data which is old news

anyway the unemployment claims and some

of the other stuff will cover that but

right now I I want to talk to you

these Micron earnings that are sending

the market to new highs it's crazy

they're actually pretty good I'm going

to give them this this is pretty good

there is a warning in them we're going

to talk about that and then China let's

hit it so first uh something to know

about artificial intelligence artificial

intelligence right now is estimated to

make up in 2024 somewhere around a $100

billion in United States GDP that's not

going to be Global that's just US GDP

throw that into about a $24 trillion

economy and your contribution from

artificial intelligence into GDP is

about 4% which is actually pretty good

because it could be the difference

between being positive or negative of

course right now the Atlanta fed thinks

that our GDP is sitting at 2.9% which is

actually also really good uh you know

we've had a Jerome Powell who's told us

oh you know we should be growing at a

below Trend growth and quite frankly

we're growing above Trend right now

maybe maybe we're just above Trend by uh

04 because of artificial intelligence

either way GDP looks good so far uh and

artificial intelligence spending is

definitely contributing now if we were

to only hang our hat on GDP and or on

artificial intelligence and everything

else was flat well we would only have a

GDP of about 4% again artificial

intelligence only making up about 133%

of our GDP most of our GDP is really

made up by you the

consumer so that's this is an important

cont contributor nonetheless especially

when micron pulls off what they just did

now something to know about Micron

that's really interesting before I tell

you what they just pulled off which you

maybe have already heard about a little

bit but something to know is this is a

cyclical company which means you go

through really rapid boom and bus Cycles

just to let you know how extreme those

boom and bus Cycles can be this same

quarter that we just reported last year

Micron lost $1.4 billion because the

memory Market went to trash there gross

margin was - 10.8% which means they were

selling their chips for less than they

were worth mostly memory chips uh and

now in part thanks to their artificial

intelligence ships doing well for now of

course until competition picks up which

there's a warning coming up in just a

moment and there's some this is from

them not from me uh right now their

margins are really excellent because

quite frankly on their high bandwidth

memory products for AI server and data

centers it they they're sold out for

2024 and 2025 which when I first read

that I'm like oh they're sold out for 2

years but then I'm like H this year is

already almost over so they're sold out

for about 15 months which is good

they've already got that pricing set for

that doesn't mean orders can't cancel

but it's certainly a good sign uh and

their gross margin this year is

35.3% on this quarter which is up from

last quarter by like almost 9 percentage

points really actually really good so

this quarter is a smokey hot quarter uh

really great quarter and so the question

is will that last is this a good time to

invest in Micron so one thing I looked

at is uh I looked at uh their guidance

for the next quarter they beat on EPS

guidance by 14% they beat on Revenue

guidance by 5% uh in this quarter they

beat margin by 5% so they are beating

expectations doing very very well here

if I read out some sections of their

earnings call they say from a demand

perspective they expect that server

demand will continue they expect AI

servers to continue to be strong this

year and next year and they don't see

any change in that they think the AI

momentum continues and they're hoping to

get some modest growth in general

purpose servers that's where you

definitely have a lag PCS smartphones

servers kind of the consumer side little

on the soft side but those AI servers

definitely cranking

in terms of demand definitely strength

and data center is driving upside to

what we had communicated prior on our

prior guidance we continue to see really

strong demand from our data centers the

data demand is coming from both cloud

and Enterprise AI servers as well as

well of course to some extent

traditional server origin that's because

that creates a certain base of their

revenues the traditional servers but

most of that extra demand that's making

the difference here is they said it

cloud and Enterprise so remember Google

Microsoft Amazon meta these are the

companies that are like we will buy AI

sea chips and build out AI

infrastructure at any cost because we

will not be left behind even if we lose

money for a while it's like what Mark

Zuck said you know sucks like yeah yeah

you know we're kind of known for doing

unprofitable things for a while and

eventually we're turn unprofitable Fair

okay so what warning did they give well

the first hint that they gave for a

warning was uh actually in the face of

of very good news which is we've seen

very high demand for our product and we

feel confident in our ability to ramp uh

I mean all of that ramp we have for 2025

is really limited by Supply hm and then

they start talking about competition so

I always find this a very interesting

one because when you start talking about

oh we're Supply limited right now what

you're really suggesting is hey we're in

a place where we're uh able to pull

these high margins because

there is limited Supply which is

fantastic don't get me wrong like milk

the margins while you can it just does

give a little bit of an awareness that

where the company says look there's

going to be a reason why we're not going

to guide into 2026 here because you know

prices could collapse as Supply ramps up

and they are blowing money into capex in

fact their free cash flow is only

somewhere around $200 million uh I want

to say that was for the year but let me

double check that really quick because I

have a cash flow statement right here

sorry I'm at a I'm at a conference and

uh that's why I'm not going to be able

to be live at my normal time today and I

snuck away into one of these little

boardrooms over here just to make sure

we can chat okay here we go expenditures

for plant property and Equipment uh $8.3

billion blowing money into capex capital

expenditure so they can continue to

manufacture more uh and 8.5 in in in

incoming cash flow uh so really very

very little actual uh free cash flow

which is not a surprise uh they they

they are a manufacturer so this is uh

they have their own Manu you know

fabrication plants this is not like an

Nvidia uh they actually uh conduct the

R&D and they manufacture so this is not

like a high margin Nvidia where you just

send it all to tsmc and you take your

70% gross margins which is one of the

reasons Nvidia is just such a sexy stock

uh but uh that is for the year ended

yeah so basically no free cash flow for

the year ended now don't worry their

balance sheet is acceptable they have

enough uh cash and short terms to cover

their short-term debt and then frankly

they have enough receivables and

inventories if they sell an inventory at

full price to cover their long-term debt

so their balance sheet is just fine

obviously their margins are excellent

this is a cyclical business and uh they

think they are very well positioned from

a competitive point of view however they

do also make it clear they're asked hey

so you feel pretty good for fiscal 2025

you just don't want to set the bar and

be accountable to that bar but you feel

pretty good is that a fair way of

summarizing everything you've said asks

an analyst the VP and CFO says we've

given some positive indications for the

year and we're Vigilant at all times

about our cost structure about our cost

performance and the discipline of our

Capital spend and maintaining stable

share and where we think we're doing a

good job of executing well and managing

the risks okay got it so what are those

risks well

overspending collapsing the prices uh in

the chip market and then competition

taking your margin away at the same time

as you now have way too much excess

Supply so it kind of makes sense why

like let them bask in their Glory a

little bit this is this is great news

okay it's going to it's pumping the

entire AI market and premarkets and and

you would expect that dude it's like

4:00 a.m. this is ridiculous I'm East

Coast so but you know I came here from G

uh but I'm just looking at my clock like

oh my gosh I'm already in a suit oh

no uh but anyway it's really good at the

same time now you've got China they held

a meeting with their pollet bu Bureau

and they're talking about trying to fall

stop the fall of home prices they're

going to stop the over supply of new

construction that's something you should

really tell Austin and Texas as well

like maybe if yall stopped building as

much you wouldn't have as many issues

but anyway uh and and they are

potentially planning some uh local

Municipal spending as well as consumer

additional fiscal spending to to help

the consumer of about $284 billion so it

seems like on a daily basis here they

kind of see the market pop up a little

bit on these stimulus ideas and then

they're like all right all right got it

yeah the market wants stimulus let's

give them

more so it's good uh I mean it's it's a

wonderful thing for for markets on this

you've actually got oil I mean I don't

think oil is moving on on China here

it's probably more of a Saudi Arabia

issue gold though going over 2700 bonds

relatively stable and pre-market

nasdaq's up 1 a 12% uh Dow in S&P also

pretty positive I think the only thing

that could really screw this up is in a

couple hours we'll be getting

unemployment claims data I that is such

a lagging indicator I can't imagine

that's bad we get Q2 GDP who gives a

flying F about Q2 GDP third revision

price index GDP whatever uh you will get

durable good manufacturing uh reports

and some other data I'll cover that when

the time comes but in the direction of

artificial intelligence if micron's any

guide there there's no slowdown here uh

maybe there's some cheap opportunities

for you to take advantage of uh and keep

in mind that this is uh AI can boom and

you can still have a recession uh but it

definitely helps like not having AI

you'd still be a 2% GDP still be over 2%

GDP so you haven't actually seen that

translation to substantial weakness just

yet of course you know as I've

maintained for a while many of the

leading indicators suggest we might be

you know one large shock away from

substantial layoffs and then your

consumer gets crushed in the near

recession but then again you know that

could be true at any given point in time

of course I I do think we're in a

particular position now where some of

the indicators of recession are more

numerous than I have ever seen in my

career uh which makes me a little bit

more dare I say nervous and watchful but

consider it you know it's not just the S

rule it's not just the 10 to inversion

which usually when we get to 50 to 90

basis points that's when the recession

starts okay we're at like 20 basis

points inverted right now but it's also

uh the peaking of of government payrolls

uh uh following the peaking in privates

the delinquencies in Consumer loans

credit card loans the decline uh uh in

the personal savings rate it's not good

now under 3% which is terrible at the

same time as incomes are only Rising

somewhere around 1% not good

architectural buildings down Isa

manufactur ing down ISM Services above

50 but very very low relative to normal

boom times construction spending month

over month down pricing power at

companies outside of AI substantially

down uh you look at um uh I went away

construction job openings rapidly

falling temp hiring longest stretch of

negative readings Drome Powell's warning

we seek no further cooling yet they

still only went down 50 basis points I

think they got a like surprise cut down

200 to honestly that would make me very

very bullish

because then they might actually avoid a

recession beige book 9 out of 12

districts uh flatter declining the

Challenger report showing the slowest

hiring since August of 2009 the number

of unemployed for 27 and uh weeks or

more never increasing consistently

absent a recession it is the restaurant

performance index sitting under 98 which

only occurs in a recession so I mean I

hate to say it

but when you put that list together it

just doesn't sound that sexy anymore but

hey in the short term the Euphoria can

march on which is fantastic I mean good

go make money uh you know take profits

as you feel comfortable or don't and uh

I love you all thank you so much if you

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folks thank you so much goodbye and good

luck