Episode summary
Micron’s Capital Spending Growth Overshadows Booming Sales | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Paul Sweeney, Scarlet Fu · Guests: Jake Silverman, Michael Halen, Lee Klaskow, Ira Jersey
Summary
Micron’s sales were described as impressive, but the bigger investor concern is the company’s rising capital spending and what it says about the memory cycle. The analyst argued that capex is increasing because Micron needs to satisfy strong AI-driven demand amid a persistent supply-demand imbalance, while pricing still looks like it has room to rise even if the pace becomes more modest. He said the key question is not just spending, but when the cycle peaks and how sustainable margins remain.
The discussion also highlighted how customer structure may be changing, with agreements extending out as far as 5 years in some cases, which the analyst said could reduce cyclicality. On competition, he pointed to Samsung and SK hynix as the main rivals, with Nvidia an important customer rather than a competitor.
Darden was presented as a strong top-line story but a margin challenge: same-store sales rose 4% even after weather disruptions, yet beef costs hurt the bottom line. The analyst said restaurant chains may raise prices, but they face a tougher backdrop if gasoline and commodity inflation stay elevated. FedEx, meanwhile, was framed as both a company-specific turnaround story and an economic barometer, with attention on Middle East disruption, weak industrial demand, and ongoing network restructuring.
The Fed segment argued that Jay Powell’s comments make the central bank more cautious, with oil prices now a key factor in whether rates get cut again.
Key takeaways
- The analyst said Micron’s capex is rising to meet AI-driven demand, not because investors are simply worried about spending.
- He expects memory pricing gains to continue, but at a more modest sequential pace than before.
- Micron’s longer customer agreements could reduce cyclicality, though the analyst said the company gave few details.
- Darden posted 4% same-store sales growth, but beef inflation hurt margins and could force more pricing.
- The Fed discussion said oil prices have become a key constraint on further rate cuts, with policymakers turning more cautious.
Notable quotes
“I think really what's going on with Micron is more so a focus on where the cycle is at”
“AI is really the major uh driver for that. It's the major tailwind”
“we think pricing still has uh a few more legs to go”
“It was, uh, it was a strong quarter on the top line”
How the episode opens
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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. One of the stocks we've been talking about today, uh, Micron Technology, uh, sales numbers, really impressive.
I think some folks are concerned about some of the spending, uh, that Micron was talking about on their earnings conference call. Uh, so let's get right to it. The stock is down 3% today.
Um, but it is just been a really strong performer uh, over the last periods. Uh, let's check in with somebody who does this stuff for a living, Jake Silverman, Bloomberg Intelligence semiconductor analyst. Uh, Jake, what was your takeaway from Mike Ron's earnings?
Yeah, thanks. I would say that I actually think it's not really the spending that uh is concerning investors. I think really what's going on with Micron is more so a focus on where the cycle is at.
Uh we've seen now a couple of quarters of very aggressive price increases uh for the May quarter, May ended quarter. Um we're going to see continued very strong double-digit pricing growth. And so what I really think is is is on the top of investors minds is when does this cycle end?
How sustainable are these margins? Because if I think about capex just because capex is increasing uh they need to increase capex in order to uh meet the high levels of demand because there's still a very strong supply and demand imbalance that we're seeing. So uh AI is really the major uh driver for that.
It's the major tailwind and if they're unable to uh match spending then uh they're not going to be able to meet the demand of their customers.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- micron capex growth
- semiconductor earnings
- darden restaurant earnings
- fedex earnings
- fed rates outlook
Companies and tickers mentioned
- MU
- DRI
- FDX
- Micron Technology
- Darden Restaurants
- FedEx
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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