Micron beat earnings. Data center revenue jumped eleven times what it was before. The stock climbed 500% in a year. Retail traders saw the number eleven and assumed it meant something.
Here's what happened. Companies bought memory chips for AI servers. Micron sold memory chips for AI servers. The transaction occurred. Journalists called this a trend.
Revenue multiplied by eleven because the starting number was basically zero. Multiply nothing by eleven and you get slightly more than nothing. Wall Street analysts put this in a PowerPoint. They used the word "exponential" six times. Nobody checked the denominator.
The guidance came in strong. Micron executives said they expect demand to continue. This translates to "we think people will keep buying our product." Groundbreaking stuff. Someone got a bonus for that sentence.
Day traders read "AI demand" and bought calls without knowing what Micron manufactures. They know it's related to computers. That's enough. One guy on Reddit said he took out a home equity loan because the chart looked like a hockey stick. The hockey stick was set to logarithmic scale.
The data center buildout continues. Tech companies spend billions on infrastructure they'll write down in three years. Micron supplies the parts. The parts become obsolete. New parts get ordered. The cycle repeats. Analysts call this a "secular tailwind" instead of planned obsolescence.
The stock popped after hours. It'll probably pop again tomorrow. Then it'll trade sideways for six months while everyone waits for the next earnings call to remember why they bought it. Technical analysis says it's overbought. It's been overbought for eleven months. The RSI doesn't care about your feelings.
Somewhere a portfolio manager is explaining to his clients that he knew this would happen all along, which is why he bought shares last week.
Photo by Brecht Corbeel on Unsplash
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