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How worried should we be about the collapse in memory stocks, which could potentially destroy the entire hardware market? And considering that hardware stocks have actually contributed to over 75% of the S&P 500's rise since April, it makes you wonder how strong the indexes will be able to hold up if we potentially see a collapse in memory stock prices.
Is this even likely? Today is one of those days where people are scratching their heads, considering SanDisk and Micron are down more than 6% today. Triple Q pulls NASDAQ 100 back from 17xm 715, even though we have a SpaceX launch scheduled for July 7th. We need to understand what's going on here and what you need to know about how important these memory chip stocks are and what their overall history tells us.
So, first of all, I met with Kevin about a week and a half ago. I warned that no matter what happens to Micron's earnings, good or bad, it's not something I'm interested in making a call on. I urged against buying call options. And now Micron is down 17% from its peak , despite absolutely dominating earnings.
So why is Micron down 17% and falling as much as it is today when the company's earnings are doing so well? Well , the answer has to do with history. And no, not with my story of getting approval from the Pope, which was really cool in Barcelona about a couple of weeks ago. And yes, we have a coupon for the Meet Kevin programs on building your wealth.
Of course, remember the live broadcasts, trading alerts, and the morning alpha report. The market is open every morning and closes tomorrow. But the history of memory is important. You see, when we actually look at memory prices, people have a lot of predictions about what they're going to do. For example, here's a guy named " money guy".
He blogs, and he claimed that we could see a sharp drop in memory prices in 2025. I'm keeping my fingers crossed. I hope not, because he held this line until 2005. I drew a trend line of monthly revenue from memory and assumed that, hey, we go through these ups and downs along this line, and if we go up a little bit here, we might see a drop again in 2025.
In fact, he literally wrote here that incomes seem to have followed the pattern of the past, and this could mean we will have another boom and bust cycle with a significant downturn in 2025. Let's hope this doesn't happen again. And this was written back when memory prices were falling in October 2023.
Interestingly, October 2023 actually resulted in losses in Samsung's memory divisions and, of course, all of SKHX and Micron's businesses. In fact, Samsung lost $11.6 billion back in 2023. That was only 3 years ago. So, three annual reports ago, you could say two annual reports ago, because we don't have an annual report for this year yet, Samsung lost $11.5 billion in its memory sector, Micron overall lost $6 billion, and SKHEX lost $7 billion for the year.
In fact, things got so bad at Micron that their number one risk factor, the first risk factor they list in their annual report, which is the volatility of average annual selling prices, that's what ultimately led to their revenue decline in 2023. Look at this. In 2023, Micron earned about $15.5 billion in revenue, but it actually cost them $16.9 billion to produce these chips.
This means that they were actively producing their chips at a loss . Chips require, essentially, high volumes and almost 100% factory utilization, in their factories, of memory chips to maintain profitability. And when you can start with, " Hey, look, we did $10.4 billion during COVID," you know, in 2021 right after Covid, I think, and in 2022 we did $14 billion , "Oh, just kidding, now we've lost $1.4 billion in gross profit." And actually, instead of making money here, on net profit, yes, we lost about $6 billion.
So every penny we earned in 2021, we lost in 2023. This has nothing to do with whether Micron is a good or bad business. This is entirely related to the number one risk factor – price volatility. And that's why , in my opinion, memory chips and memory chip stocks are really like oil and oil companies.
Oil companies make a lot of money when oil is expensive, and they lose a lot of money when oil is cheap. That's why it's their number one risk factor. Listen to this. DRAM average selling prices fell in the upper 40% range and NAN in the lower 50% range during 2023. And since 2017, annual changes in DRAM selling prices have ranged from plus 35 to minus 40 percent.
In other words, they're essentially saying, "Hey, over the last decade we've seen memory prices go up 40% year-over- year, down 35%, or down almost 50% year-over- year." A 50% decrease is bad because, you know, prices could have gone up 200%, but a 50% decrease, you know, these numbers add up very quickly , and you're left in these holes.
In fact, they indicated that since 2017, they say right here , the annual changes in average NAND selling prices have ranged from almost unchanged to minus 50%. So at least for DRAM, average NAND selling prices ranged from plus/minus 50% to minus 50%. This has recently negatively impacted our business and operations.
In other words, in 2023, memory was in terrible shape. And that was one of the reasons why a lot of the stocks of these memory chips fell sharply in price, and they were selling at very, very low prices righn, of course, in 2025, everyone got really excited about artificial intelligence, which has much higher memory requirements.
And of course, I'm oversimplifying here, but what happens to the product, namely the memory, which can be replaced with memory chips from another company? This is a commodity whose price has skyrocketed because we now have enthusiasm for artificial intelligence. But we need to look at the last two quarterly reports to see how much pressure we're really putting on Micron and how important it is that they continue to support this market.
And now a quick reminder: yes, the coupon expires tomorrow. This is a "Pope" coupon. You can join the Alpha Report every morning where we discuss short-term, medium-term and long-term trading alerts. This is partly due to the fact that at Reinvest AI, that is, reinvest.co, we are releasing a product for evaluation tomorrow.
It's been in beta since around Thanksgiving with more or less likely deals, but we're actually showing how we think deals might rank based on how much money you can make from them. So we are very happy about this. Both of these products will have a coupon that expires tomorrow. Also Meke Kevin and Reinvest AI membership.
This is a chaos house product on reinvest.co or check out Kevin.com for a Meke Kevin membership. So what do we need to know when it comes to Micron's latest earnings? Well, look here. You have Micron for the third quarter. Okay, these are the numbers that just came out. What I want you to do is just see the difference between these two quarterly reports.
I compared them back and forth. I aligned them perfectly for you. This one here, without highlighting. I'll use a little red here. This was last quarter's report, and it was really good. In fact, if you, as a course participant, go to the “Actions” tab, you will see that I have highlighted the junk in these documents.
Just to give you some ideas, this company invested $11.7 billion in capital expenditures in the first quarter alone. They expect to spend $25 billion. They are expanding their high-speed memory (EMM) manufacturing plant, er, in Singapore in 2027. We expect more factories to come online in, uh, what do we have here?
We have a manufacturing facility in Idaho, uh, uh, or a memory manufacturing facility in Idaho, which is expected to be in place in the middle of the '27th. It will be next year. Then we have another plant that will be operational at the end of the 28th. We have another plant that will be operational in 2030.
So, we have more production. And we delved into why this is happening. A lot of this has to do with the Chip Act, which Donald Trump secretly hates. Well, actually he publicly hates it, but secretly he seems to coordinate the spending of money. Um, they get tax breaks on their investments, not only from the CHIPS law , the 35% benefits, but also from the state of New York.
They have several different segments here. But some things to note when I look at this shares tab in the mechanics membership section is that two components that are outside of the data centers are actually down right now . The mobile and client business units, as well as the automotive and embedded business units, are actually seeing a decline in demand for memory chips.
Whereas in reality it is the AI cycle that drives this price demand. And I brought up this analogy with average sales prices this morning because these average sales prices are going crazy. And I'll tell you an analogy in a minute that I told, uh , the course participants about. But look at this. This is the most vivid version of average sales prices.
We saw about 8-9% quarterly growth in actual unit shipments. Uh, that's about 32, if you call it a 40% unit growth. So they sell more units, right? But they raised prices by 60-70% just from the first quarter to the second. And compared to last year, they have doubled their prices. They doubled the prices right here.
Compared to the second quarter of last year. DRAM prices have increased by 110%. Roughly closer to maybe 115%, and NAN prices have increased a little more than double. This is a huge, huge price increase, which is the exact opposite of what happened in 2022, when we saw a sharp drop in memory chip prices, a complete collapse.
It got so bad that a guy who blogs about memory prices essentially said, "Dude, this is so bad that we could actually face another recession in 2025, which was the exact opposite of what happened thanks to AI." And I'm not trying to blame them or criticize them. You know, AI has changed a lot. But the thing is, people are so used to boom and bust cycles that they draw these lines and say, "It's going to be bad again, boys and girls." "It will be terrible again." except for what actually happened.
Another price boom. And so I want to show you the difference between them, and then I'll give an analogy from today's live broadcast for course participants. Look at this. This was the last quarterly report without an allocation. You see, you can see an average range of 110% and a little over 100% growth in average selling prices.
Are you ready to see their latest earnings report, which was an absolute breakout? Literally a breakthrough. They surpassed everything. Absolutely incredible profits. The best profits you could ever see. I mean, this company is printing crazy money. Good. Why? Why are they printing so much money? Okay, are you ready for this?
Do you think it's because the business is somehow able to make a better chip? Perhaps. I actually think it has a lot more to do with it. Ready? Watch as I turn this page. Boom. Year after year, prices have increased. Instead of a range of 110-115%, they actually increased average sales prices by 260%.
And NAND products grew by about 315%. What? Yes, dude. This is three to four times the average selling prices. So, literally in the last report, I'm like, "Oh my God, most of their revenue increase is due to price increases, because they're doubling the price of chips." Well, now they said, "Hey, JK, we're actually tripling and quadrupling prices, and that's why we're making so much money." And this is where it's really helpful to understand the analogy that I'm going to give you, because it will help you understand why Micron has been falling since I warned about Micron and SanDisk has been falling since I warned about Micron.
Why? Okay, so I'm going to grab an old board here. And this ... I actually really like this analogy. I hope you like it too. The thing is, when I make these analogies, people sometimes think, " Okay, the video is over." They give up and then skip the most important parts . I think these analogies can help you have that moment of awakening and say, “Ah, I get it .
"Yes, that makes sense." And what I'm going to tell you is actually a way to think about all the AI euphoria that we're seeing. OK? So the analogy I'm going to give you is a real estate analogy, but again, we're just using real estate to help you visualize the chip sector. And you might be thinking, " Kevin, what do houses have to do with chips?" " Look." Okay, maybe you know this.
I run a company called Houseack, also known as Reinvest. You see, I'm wearing a small T-shirt. Uh , and this is a company that owns real estate and assets worth over $80-90 million . No bank debts. And , uh, you know, I think we're doing some really good things. We have cool apps. We have cool software, a great software business, in addition to owning real estate.
And if someone came to me and said, “Hey, Kevin , we want you to take a billion dollars and go buy houses, but we want you to buy houses the way you always buy houses. We want you to buy houses with a 20% discount. We want you to play like Warren Buffett, okay? Do everything you can to get out there, take that billion dollars, and get 20% off as many homes as possible.
Work to the bottom. It will be a lot of work. Go get that ROI , right? In this case, I need you to know that the ROI or return on investment will equal time. It will probably take me a few years to raise a billion dollars. I think I would do very well with that. Right? Good. I'm telling you, there's an analogy here with chips.
I know people say, “Kevin, are you just trying to sell house hacks?” “ No, we’re reinvesting. Oh , no. No. This is an analogy. Ready? And that's why you stay until the end of the video. I think you actually benefit from it, but with moments of awakening. Are you ready for this? What if someone came to me and said, " Kevin, we need you to buy a billion-dollar property." We don't really care about 20% or ROI .
We need to spend it now. And, uh, we won't point a gun at your head. Uh, if you don't spend this billion dollars now and then cancel it within the next week or two, we'll kill you. OK. Guess what I'll do when it comes to buying billion dollar homes? Well, I'm going to go out there and buy every damn active offering, and I don't care how much I have to pay .
I will overpay. I'm overestimating the bet. I'll do whatever it takes to get these houses, because I don't want it, you know. OK". Why does this matter with respect to chips? Because right now in the chip industry, no one cares about return on investment. People are just worried: I need this now. I need memory chips now.
I need fuel cells now. We don't have time to wait for FCL, a company that just raised $49 million in funding and for some reason is doing a bit of meme-making, which is nonsense because they really need to prove that they can sell their product. But you know, more relatively, you can look at a company like Bloom Energy.
Bloom Energy impresses with fuel cells . Fuel cells. You can get them approved in about 2-3 months and get them up and running. They are by no means as efficient as a natural gas turbine power plant, but permits for this are issued for 4 to 5 years. They are certainly not as cost- effective as building a natural gas turbine power plant combined with solar and wind energy.
But it takes years. No one wants to wait years for their data center energy right now. They want it now. They want their memory chips now. They want their Nvidia GPUs. Nobody cares about ROI these days , and savvy investors understand that we can get to the point of madness in terms of how much companies are able to raise prices, where they can literally write in their reports, "Hey, we just tripled and quadrupled prices." When a company tells you, "Hey, we're dominant because we just tripled and quadrupled prices," and you know it's a cyclical product, people start thinking, " Okay, how much better can it get?" Maybe, just maybe, it's time to make a little profit.
Anyway, thanks . Be sure to use the pope coupon to get more outlook and analysis, fundamental analysis, technical analysis, short, medium and long term trades, best stocks i plan to buy over the next 10 years and beyond. So check it out on meetke.com. And remember, if you want to reinvest in AI, you can also check it out at houseack.com or reinvest.co. The sam.
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