A couple of thoughts on the memory debate: 1) I think those expecting ASPs/GMs to soon fall sharply because memory makers are signaling that – amid the signing of LTAs with price caps/floors and large volume commitments – GMs won’t go any higher often don’t appreciate how much unmet data center memory demand there is right now. With memory capacity directly or indirectly affecting LLM size, context length, TPS and the ability to handle long-horizon agentic tasks, the likes of $NVDA and $AMD would undoubtedly attach more HBM to their accelerators, and both they and hyperscalers would include more main memory and flash storage in their server designs, if supply wasn’t an issue and they could be assured that prices would be around current levels or lower going forward. All of that’s worth keeping in mind when trying to gauge the longer-term impact of LTAs. Yes, LTAs have been broken before and it’s possible the ones memory makers are now signing are eventually broken as well. But given all that unmet demand, it’s also possible they lead to far more memory being attached to accelerators and servers in 2028/2029 (as supply opens up), and with the memory being sold at ASPs that yield healthy GMs by historical standards. 2) At current valuations, memory makers might be trading at single-digit multiples of what they’ll earn in a couple of years even if DRAM/NAND ASPs drop by 30% or so, especially after accounting for volume growth, cost/bit declines and buybacks. For memory stocks to look truly expensive here, ASPs would have to implode, and -- given all that unmet data center demand, as well as price elasticity for consumer memory products -- that seems unlikely to me unless AI capex meaningfully declines. And if that’s the scenario one is betting on, then memory stocks are far from the only AI infra plays one should be selling here.

A couple of thoughts on the memory debate: 1) I think those expecting ASPs/GMs to soon fall sharply because memory makers are signaling that – amid the signing of LTAs with price caps/floors and large volume commitments – GMs won’t go any higher often don’t appreciate how much unmet data center memory demand there is right now. With memory capacity directly or indirectly affecting LLM size, context length, TPS and the ability to handle long-horizon agentic tasks, the likes of $NVDA and $AMD would undoubtedly attach more HBM to their accelerators, and both they and hyperscalers would include more main memory and flash storage in their server designs, if supply wasn’t an issue and they could be assured that prices would be around current levels or lower going forward. All of that’s worth keeping in mind when trying to gauge the longer-term impact of LTAs. Yes, LTAs have been broken before and it’s possible the ones memory makers are now signing are eventually broken as well. But given all that unmet demand, it’s also possible they lead to far more memory being attached to accelerators and servers in 2028/2029 (as supply opens up), and with the memory being sold at ASPs that yield healthy GMs by historical standards. 2) At current valuations, memory makers might be trading at single-digit multiples of what they’ll earn in a couple of years even if DRAM/NAND ASPs drop by 30% or so, especially after accounting for volume growth, cost/bit declines and buybacks. For memory stocks to look truly expensive here, ASPs would have to implode, and -- given all that unmet data center demand, as well as price elasticity for consumer memory products -- that seems unlikely to me unless AI capex meaningfully declines. And if that’s the scenario one is betting on, then memory stocks are far from the only AI infra plays one should be selling here.

Source:https://x.com/jukan05/status/2086592448625865077