GP Bullhound's weekly review of the latest news in public markets.
GP Bullhound
GP Bullhound is a software advisory and investment firm supported by 120 employees across 13 offices globally.
This week’s GP Bullhound Tech Thoughts Newsletter, brought to you by Inge Heydorn and Ofelia Aspemyr, highlights:
Market: Market volatility in major tech names has clearly increased during the last two weeks. However, industry fundamentals have not changed. Strength in the AI sector continues, while some sectors, like networking, still struggle with inventory overhang. The volatility is driven by valuation worries and the strong rally in AI names.
Portfolio: We have not made any major changes to the portfolio this week. However, we are trying to capture additional returns by buying on weakness and selling on strength in individual names.
Weekly Conclusion: Micron is sold out of HBM memories for AI solutions for both 2024 and 2025. This indicates that gaining market share in AI solutions will be challenging due to supply constraints in the industry.
Quote of the Week
Sanjay Mehrotra, President and CEO of Micron: “Due to expectations for continued leading-edge node tightness, we are seeing increased interest from many customers across market segments to secure 2025 long-term agreements ahead of their typical schedule.”
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Results
Micron (small position owned) Q3 Results: Micron's Q3 results exceeded their own guidance across the board. Sales totaled $6.8 billion (+17% Q/Q and +82% Y/Y). DRAM sales grew 13% Q/Q with bit shipments declining in the mid-single digits. NAND sales grew 32% with bit shipments increasing in the high single digits. Prices in both segments were up 20%. HBM memory sales are expected to reach $100 million in 2024 and billions in 2025. Micron, the second-largest supplier in the market after SK Hynix, expects its market share to increase in 2025. Micron’s HBM memories are sold out for 2024 and 2025, with pricing already contracted for the overwhelming majority of the 2025 supply. The company expects Q4 sales of $7.4 billion to $7.8 billion and EPS of $1 to $1.16, in line with expectations. Capex is expected to total $8 billion in 2024, with $3 billion in Q4. Micron also expects a significant Capex increase in 2025, driven by AI and the construction of two greenfield fabs in the US (supported by the CHIPS Act). The guidance aligned with market expectations, though the whisper consensus was higher, leading to a slight dip in the share price. However, we believe the company's guidance is overly cautious in the short term, given current industry trends. The risk remains that producers may add too much capacity, driving down prices. Nonetheless, we see the results as further evidence of a high-demand environment for the coming years.
General
Google's Early Pixel Event: Google has scheduled its Pixel event for August 13th, earlier than usual and ahead of Apple’s iPhone 16 release in September. Originally planned for October, our best guess is that Google aims to launch new AI services for smartphones ahead of the Apple event, positioning themselves and Android as leaders in this space.
ChangXin Memory Technologies (CXMT): The Chinese DRAM manufacturer CXMT has received government approval to establish a new manufacturing site in Shanghai, according to industry sources. The largest risk to the recovery of the memory market is that too much capacity is being added in the short run. While this is not happening currently, it is something to watch carefully.
For enquiries, please contact: Inge Heydorn, Partner, at [email protected] and Ofelia Aspemyr, Associate, at [email protected]
About GP Bullhound: GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s best entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 12 offices spanning Europe, the US and Asia. For more information, visit www.gpbullhound.com