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Micron: New Nvidia?

Nvidia has been hottest tech company (and stock) for last 3 years with his stock more than triple in just 18 months. Most of the excitement is justified due to Nvidia's unique position in cloud players (Amazon, Google etc) as well as emergence of Artificial Intelligence in self-driving cars (Tesla and so on). So while Nvidia stock may not repeat last 3 years feat, there are other companies which could offer similar excitement. Micron (MU) has been on similar trend with its stock already tripling from under 12 to 39 in 18 months. Last week Micron announced record quarter with revenues growing at 91% compared to last year. Let's look at factors which are causing "commodity" players like Micron shine.
  • Micron makes DRAM and NAND memories. In technology world, ASP (average selling prices) go down every year. Due to demand and supply imbalance, ASP for DRAM and NAND   have gone UP by 6-8%. That's rare!
  • On demand side:
    • Memory markets used to be driven mainly by PC industry. It's no more true since memory is being used across so many devices like mobiles, automobiles, robots, VR, watches, IOT devices and so on
    • Average use of memory everywhere is going up (blame it on SW engineers)
    • Applications are becoming memory intensive even if some of the compute intensive tasks can be handled by customized ASICs/GPU/TPUs
  • On supply side:
    • There are really only 3-4 players in this market - Samsung, Hynix, Micron and Toshiba
    • It takes major capital investments and close to 3 years to bring on new supply
    • Due to obvious benefits of quadropoly, none of the suppliers want to rock the boat by over-supplying the market
So in all, supply-demand would remain in favor of demand and hence ASP of memory would remain high or steady for some more time. 
With Sanjay Mehrotra as CEO, Micron got a seasoned CEO (and he is from Cal, Go Bears!) with excellent background in technology and business. So Micron company is in very good position. What does it mean to stock given it has already gone up so much. It is worth the investment? After results, it has already gone up by over 11% in one week. It has potential to go $60 in next 18 months giving potential return of over 50%. (MU management rejected Chinese offer 3 years back to acquire it at $33 which was right decision). I recommended it at $22 at start of year and would still stand behind my recommendation of MU at $38-$39. Given that Oct is here (worst month for stock markets), you may want to wait to see how it plays out over next 3-4 weeks and take small positions if stock goes down.

PS: Usual caveat of doing your own research before investing remains!

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