DRAM valuation discount is too wide
The guest argued that memory and DRAM producers like Micron are undervalued relative to expensive semi cap equipment and other data center plays.
The argument
The guest noted the incongruity of Micron trading at a very low multiple of next year's earnings while Caterpillar traded at a premium, arguing that both valuations cannot be correct if both are tied to the data center buildout. Strong momentum and underweight positioning among institutional managers could continue to drive memory shares higher.
The thesis, stress-tested
✓ What validates it
- ✓Micron reporting sustained high margins and earnings beats in upcoming quarters
- ✓Institutional allocators increasing their portfolio weightings in DRAM stocks
▸ Risks discussed
- ▸DRAM supply growth eventually catching up with and exceeding demand
- ▸High momentum reversing if the broader data center buildout slows down
Hear it yourself
"You you know what I mean? Like, you have that similar. And so I just, yeah, I totally just thought I should just cope with my view because, you know, it's some of these things are really hard to forecast, like currency and interest rates for sure, and oil and other things. So we might as well just use our judgment. And, and now I I think we said it's definitely to be true, which is the stock market leads the economic data, not the other way around anyway. So they the economist the economist meeting should be after the equity meeting. They do it in reverse, I guess."
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