| | | | GAAP (1) | | Non-GAAP(2) | | | | --- | --- | --- | --- | --- | --- | --- | --- | | (in millions, except per share amounts) | FQ1-26 | | FQ4-25 | FQ1-25 | FQ1-26 FQ4-25 | | FQ1-25 | | Revenue | 5 19 | 13.643 | 11,315 60 | 8.709 32 | 13,643 38 | 11,315 $ | 8,709 | | Gross marqin | | 7.646 | 5.054 | 3,348 | 7.753 | 5.169 | 3.441 | | Percent of revenue | | 56.0% | 44.7% | 38.4% | 56.8% | 45.7% | 395% | | Operating expenses | | 1.510 | 1.400 | 1.174 | 1.334 | 1.214 | 1.047 | | Operating income | | 6.136 ...

Core Insights - Morgan Stanley warns that soaring memory-chip prices will negatively impact profit margins for computer makers, leading to downgrades for several companies including Dell Technologies [1][5][6] Memory Market Dynamics - The memory market, particularly Nand and DRAM, is experiencing a pricing 'supercycle' due to increased demand from hyperscalers, a shift to high bandwidth memory (HBM), and previous underinvestment in Nand [2][4] - Spot prices for memory commodities have surged by 50-300% over the past six months, with contract prices expected to rise by double digits each quarter through 2026. Memory fulfillment rates may drop to as low as 40% in the next two quarters [3] Company-Specific Downgrades - Dell Technologies' stock was downgraded from overweight to underweight, with a price target reduced from $144 to $110. Hewlett Packard Enterprise's rating was cut to equal weight with a target of $25, down from $28. HP's stock was downgraded to underweight with a target of $24, down from $26 [5][6] - Other companies affected include Asustek, Giga-Byte Technology, Lenovo, and Pegatron, which were also downgraded by Morgan Stanley [6] Market Reactions - Following the downgrades, Dell's stock fell over 6% to $124.53, HPE's stock dropped more than 6% to $21.34, and HP's stock decreased over 3% to $23.58. In contrast, memory-chip makers Micron Technology and Sandisk are trading at record highs [6]

Core Insights - The memory industry is experiencing a cyclical recovery driven by increased capital expenditures from hyperscale companies and demand from AI inference, with historical data suggesting that the industry has not yet reached its peak [5][10] - UBS indicates that demand growth is outpacing supply growth, leading to a projected shortage in the coming year [7] Market Trends - The current memory cycle is reminiscent of past cycles, particularly the rise of cloud computing, with AI inference driving demand [5][7] - Memory stocks have seen an average increase of 178% this year, but to match the peak growth of 160% YoY seen in 2017, contract prices would need to rise by approximately 60% [10] Investment Strategies - Morgan Stanley suggests a more lenient approach to valuations during the upward phase of the cycle and an optimistic outlook on earnings expectations, especially during super cycles [9] - Historical data indicates that memory stocks typically peak 4 to 8 months before earnings peak, suggesting a need for cautious exit strategies [10] Demand and Supply Analysis - The demand and supply model shows that while demand is increasing, supply is not keeping pace, leading to ongoing shortages [12][14] - Inventory levels in the industry are never zero, which means that even in tight supply conditions, there will always be some inventory, affecting pricing dynamics [14]

Core Viewpoint - Micron Technology reported strong fiscal fourth-quarter results, exceeding analyst expectations, driven by robust growth in AI data centers, leading to a rise in its stock price in after-hours trading [1][2]. Financial Performance - Micron earned an adjusted $3.03 per share on sales of $11.32 billion for the quarter ending August 28, surpassing analyst expectations of $2.86 per share and $11.22 billion in sales [2]. - Year-over-year, Micron's earnings increased by 157%, while sales rose by 46%, marking the third consecutive quarter of triple-digit percentage gains in earnings [2]. - For the current quarter, Micron forecasts adjusted earnings of $3.75 per share on sales of $12.5 billion, compared to Wall Street's expectations of $3.10 per share and $11.91 billion in sales [3]. Stock Performance - In after-hours trading, Micron's stock rose nearly 2% to $169.27, following a 1.1% increase during the regular session, closing at $166.41 [4]. - The stock reached a record high of $170.45 in intraday trades last Thursday [4]. Market Position and Strategy - Micron's CEO highlighted the company's strong momentum entering fiscal 2026, emphasizing its unique position as the only U.S.-based memory manufacturer to capitalize on AI opportunities [5]. - The company produces two main types of memory chips: DRAM and NAND, with a recent boost from high-bandwidth memory (HBM) for AI applications [5][6]. - Micron is featured on three IBD lists: IBD 50, Leaderboard, and Tech Leaders, indicating its strong market presence [6].