Micron Forecast Fails to Satisfy Investors After AI-Fueled Rally

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1:45Scarlet Fu:Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Right now, we want to go back to our Interactive Broker Studio and bring in one of our very own experts. And he is, of course, the expert on Micron. And we want to talk about Micron because the stock is lower today despite a beat and raise quarter. We do have with us Jake Silverman of Bloomberg Intelligence. He's a semiconductor analyst.

2:27Scarlet Fu:And Jake, I wonder how much of this disappointing price action today is tied to the fact that the stock has had a blistering run in 2025, more than doubling in value? Yeah, no, I think it has a lot to do with just very high expectations coming into the quarter. You know, stock being up 95 % year-to-date going into the report last night just had a lot to do with it. But overall, look, I mean, the fundamentals of the business remain very strong. I think the commentary on the call last night from management was very positive. And so I think we're going to continue to see an upcycle in memory, at least for the near term.

3:05Geetha Ranganathan:So what is the call here? What's the street looking for for this name? Again, a stock's just, as you mentioned, ripped this year up 94 % year to date. What's the call here? Yeah, no, I mean, I think investors are really looking at high bandwidth memory. They're looking at AI. They're looking at data center related revenue. In the last fiscal year, data center related revenue was 56 % of sales. So as demand continues for that, We also have to keep in mind that there's traditional products as well that are an important part of the business, and that includes smartphones and PCs. Investors really want to see continued pricing strength.

3:45And as demand continues to grow for high bandwidth memory, which is very important for AI, and as capacity for that shifts over to high bandwidth memory, It further constrains the supply because it has lower yields, it has larger die sizes. So there's only so much capacity in the industry, and it's shifting over in favor of AI, and that's just constraining supply for traditional products, which, given the importance of supply and demand balance in the industry, it would suggest that as long as demand for AI continues to grow, we'll see further pricing increases.

4:22Scarlet Fu:So that's a lot of conditions. I mean, you talk about memory chips, which Micron is the biggest U.S. maker of. We know that this business is kind of famous or infamous, really, for merging between booms and busts. And that results in these price swings to compensate for the previous, you know, plethora of chips or dearth of chips. How does the AI revolution change this dynamic? Yeah, I know. And as I said before, really, I want to put emphasis on the fact that high bandwidth memory demand constrains supply for other products, specifically with DRAM. But DRAM now accounts for about 80 % of sales for the company.

4:58So it's vastly more important than what we're seeing in NAND. But the other 20 % of sales in NAND, we're also seeing strength for enterprise solid state drives, which are also important for AI. So, yeah, look, I mean, I think historically we've seen cycles, up cycles tend to last somewhere between seven to ten quarters. But we're now extending beyond that. I mean, we're looking at, based on the guidance last night, at least 12 quarters. And then based on, you know, the potential for further increases in pricing, it could extend all the way through the next fiscal year at a minimum. So, yeah, I mean, really, it's just kind of an almost unprecedented situation, or at least not something that we've seen in a very long time.

5:40and it really just comes from structural tailwinds from AI, both on demand, which is improving pricing via different products like high bandwidth memory, but also just because, like I said before, it's just constraining overall supply. And that's not just unique to Micron. That's true for both SK Hynix and Samsung as well. And the three of them account for the vast majority of DRAM demand in the industry and NAND as well.

6:04Geetha Ranganathan:Yeah, Drake, that's kind of where I wanted to go. The competitive landscape here, it feels like there's, again, You mentioned kind of three names there. Is that really kind of what's driving this? Are those three companies driving this business? Yeah, yeah, yeah. So SK Hynix has really had the lead in high bandwidth memory. Micron has become sort of a very fast follower. And now there's reports that Samsung will be supplying into NVIDIA's Blackwell Ultra platform, which might pave the way into Rubin for them as well. So, I mean, I think this three-company dynamic that we'd seen for a very long time, Obviously, we've had some Chinese competitors come on.

6:39But this three-company dynamic that we saw in traditional DRAM seems to be now shaping up again for high-bandwidth memory. So I think those past dynamics that we've seen are going to be the dynamics going forward again.

6:54Geetha Ranganathan:Stay with us. More from Bloomberg Intelligence coming up after this. Over$100 trillion estimated to be transferred to generations in the next 25 years. It's both a risk and opportunity because we see that only about 18, 19 percent of high net worth investors plan on sticking with their advisor post-transfer. This has to be a tough statistic for some to hear.

7:16Scarlet Fu:People who work so hard trying to grow their net assets, they want to protect that life work and they want to make sure that it is able to transfer in a seamless way.

7:29Geetha Ranganathan:Get the news you need in just 15 minutes. Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager. And I'm Karen Moscow. Join us each morning for curated stories on current events, politics, business, and foreign relations. Plus one conversation on the day's biggest developments, all in just 15 minutes. Subscribe to Bloomberg Daybreak for a precise, thoughtful take on the stories that matter. Listen to Bloomberg Daybreak each morning on Apple, Spotify, or anywhere you listen.

8:01Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Now, last night, Jimmy Kimmel returned to television a week after the show was suspended by ABC. The late night host said, quote, it was never my intention to make light of the death of a young man. He did receive a warm reception from the audience. Kimmel made an impassioned case for free speech. He poked fun at President Donald Trump and the FCC chairman, Brendan Carr.

8:36Scarlet Fu:He also said that pressuring affiliates to take his show off the air, quote, is not legal and, quote, is not American.

8:44Geetha Ranganathan:This show, this show is not important. What is important is that we get to live in a country that allows us to have a show like this. All right, that was Jimmy Kimmel last night on his return to TV. What does this mean for the ABC television network? What does it mean for the Walt Disney Company that owns ABC? Let's check in with Geetha Ranganathan. She's the media analyst at Bloomberg Intelligence. She's based down there in Princeton. Hey, Geetha, this late night, does it mean anything for the networks anymore? Do they make any money there? They don't make a whole lot of money, Paul. Not anymore.

9:22It used to be that late night television would bring in a lot of ratings, would bring in a lot of ad dollars. That has really changed. We've seen linear TV kind of hemorrhage viewers now over so many years, and late night is no exception. So if you just kind of look at Jimmy Kimmel's show, for instance, it generates roughly about$50 million in ad revenue. Compare that to a few years ago when it used to generate close to about$150 million. So definitely ad revenue going down. And most of these late night shows are losing money, just given the programming budget for these shows. So not really a needle mover in a financial sense for Disney.

10:04Scarlet Fu:OK, but in a cultural sense, it is because these are shows that define the networks. And so thank you for putting numbers to that, because I think there's a lot of concern or skepticism from certain corners of American communities that question whether Stephen Colbert's show should have been canceled for financial reasons, as CBS asserts it was. Geetha, is ABC going to pay some kind of price for allowing Kimmel to go back on air? Because the president, for instance, alluded to making more money off the company for doing so. Yeah, it's certainly possible. I mean, we've seen President Trump kind of go after, you know, the broadcast networks, threaten to kind of revoke licenses.

10:43So he goes after anybody. He uses his power, you know, the courts to attack anybody who says anything unflattering about him. So that's, you know, definitely possible. From a Disney perspective, though, you have to remember, this is a very, very diversified company. So, yes, ABC is definitely a very important asset. But again, if we put some numbers around this, Scarlett, it makes up only about, they generate, Disney itself generates about$90 to$100 billion in revenue every year. ABC is about$5 billion,$5 to$6 billion in revenue. So it's just about 5 % for the company. So again, you know, small potatoes in the context of the company's financials.

11:23But yes, you bring up a very important point about culture wars. Unfortunately, I think Disney is in a losing position, whichever way, because they're either going to anger, you know, the conservatives or the other end of the spectrum. So it's just tough.

11:38Geetha Ranganathan:Yeah. Hey, Geetha, I noted that two of the big TV station groups out there, Sinclair Broadcast Group and Nexstar, they are still not airing Jimmy Kimmel. What's the latest there? Can they do that? Or is there an affiliation agreement with ABC Network? No, you've got to cover it. You've got to carry it. So the FCC does allow broadcast affiliate groups like Nextdoor and Sinclair to preempt certain programming if it deems fit. So from a legal standpoint, yes, they are allowed to do that. Again, we're not sure of the exact contractual language between Disney or Nextdoor or Sinclair. So again, not sure how long that's going to drag out.

12:18You know, Disney is a very important partner for both Nextdoor and Sinclair. But remember, there's much more here at stake than just, you know, Disney's affiliation agreement. Nextar is in the midst of a$6.2 billion deal to acquire Tecna, which is another broadcaster. They do need the FCC's blessing. And so they're, you know, kind of trying to really, you know, please the FCC here, if you will, to kind of get a green light on that deal. Sinclair, again, a similar situation. There's a whole wave of broadcast consolidation that's supposed to happen, and they all want to be on the FCC's right side.

12:53Scarlet Fu:Very quickly, Geeta, in the days following Kimmel's suspension, a number of people canceled or threatened to cancel their Disney Plus streaming services. Do we have a sense that this might get kind of noisy when it comes to the earnings reports and the streaming numbers and subscriptions? I mean, we've seen this kind of backlash before happen, you know, in the case of certain programming and, you know, with Netflix, with other streaming services. Typically, we haven't really seen it reflected in the numbers, even though there's a lot of noise around it. So, yes, maybe a little bit of up and down, but I don't think it'll have, again, any big needle-moving effect on the Disney Plus subscriber numbers.

13:30Geetha Ranganathan:All right, Geetha, while we got you here, I have to ask, do we have any news on succession to Bob Iger? Not yet. Not yet, Paul. I mean, that's the biggest question always for Disney. He is supposed to retire by the end of 2026. there is a lot of rumblings that it might be somebody internal. You know, we keep hearing about Dana Walden. Of course, nothing certain just yet. Stay with us. More from Bloomberg Intelligence coming up after this.

13:59Scarlet Fu:The Bloomberg Sustainable Business Summit returns to Singapore on July 22nd. Our fifth annual Asia-Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience and driving a multi-speed energy transition across Asia's diverse markets. Join us for solutions-driven discussions and networking opportunities. Thank you to our summit advisor, Bangkok Bank. Learn more at BloombergLive.com slash SBS dash Singapore. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App.

14:40Scarlet Fu:Listen on demand wherever you get your podcasts or watch us live on YouTube.

14:45Geetha Ranganathan:New housing starts came in way higher than expected.

14:49Scarlet Fu:Fastest pace since early 22. Unexpected surge there.

14:53Geetha Ranganathan:Yeah, absolutely. Let's see what's going on out there in the new housing market. Drew Redding, Bloomberg Intelligence, U.S. Home Building Analyst, joins us. He's down there in Princeton joining us via that Zoom thing. Drew, what's going on in the new housing market? Yeah, some pretty eye-popping numbers today from the census. Scarlett mentioned the fastest pace since early 2022. I think you need to take these numbers with a grain of salt. The report said that sales were up 20 % from last month, plus or minus 22%. So maybe they were down, maybe they were up a whole lot more. Sounds like one of my estimates.

15:28Geetha Ranganathan:This is a historically volatile data set, and it does contrast with some of the recent data that we've had. Our friends over at Zonda, who track about 85 % of the new home market, said sales were up low single digits in the month, still lower from last year. And if we look at applications to purchase new homes, they were actually down 6 % sequentially, which is more of a leading indicator. And on top of that, we heard from last week from the second largest home builder in the market, Lenar, who said that they're having to take their foot off the gas pedal in terms of volume because the market's just not supporting it.

16:03Geetha Ranganathan:they're still having to incentivize buyers. So, you know, we do agree that lower rates will certainly help demand. But do we think the market snapped back as strong as this report suggests? Probably not.

16:15Scarlet Fu:Okay. So maybe the numbers will need to be revised. And there's a trend here with numbers needing to be revised. But the home sales numbers overall reflect contract signings, which usually take place at least a month before the transaction is complete. So it may capture a little bit of the turn in the housing market. Could this be the beginning of, I don't want to say an upswing, but at least stabilization?

16:37Geetha Ranganathan:So I think, so first of all, the pullback in rates during the month of August was about 10 basis points. We didn't really see that dramatic shift lower until really in September when rates got into the low 6 % range. What's interesting is that since the Fed cut, rates are actually up 25 basis points to about 6.4%, which is kind of similar to what we saw the last time to cut rates is the Fed cut and mortgage rates increased. Like I said, I do think that lower rates are certainly going to help that marginal home buyer. But at the same time, when we talk about housing, rates certainly get all of the attention because of the affordability constraints we're under.

17:15Geetha Ranganathan:But I think you need to also focus on the labor market. We've had some pretty large job revisions recently. We actually showed net loss in June. And if you look at some of the survey data, consumers out there have a growing concern about unemployment rates over the next 12 months. And for those that do lose a job, the expectation that they're going to be able to find a new one within the next couple of months is not very strong. So one of the things that we've heard repeatedly from the builders is this lack of confidence, which is holding buyers back. So on the margin, rates certainly help affordability.

17:49Geetha Ranganathan:They don't solve the problem. So we think it helps buyers on the margin. But again, I don't think, broadly speaking, this returns us back to a more normalized level of transactions.

18:01Scarlet Fu:This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

18:27Geetha Ranganathan:The Big Take podcast from Bloomberg News keeps you on top of the biggest stories of the day. My fellow Americans, this is Liberation Day. Stories that move markets. Chair Powell opened the door to this first interest rate cut. Impact politics. Change businesses. This is a really stunning development for the AI world.