Micron on 30 September, the sentiment test for the memory cycle

The short version

• Micron reports figures on 30 September, and Broadcom already reported on 2 September.
• The price to earnings ratio on the basis of expected profits stands at about six according to market reports.
• The company holds around 18 billion dollars of customer prepayments and has booked more than 100 billion dollars of contractually committed minimum revenue.

A crowded calendar

September is the densest month in the calendar of AI hardware. Broadcom reported on 2 September, and Micron follows on 30 September.

Attention is directed at the second date in particular. Micron counts as a gauge for the memory cycle, and that is currently the most striking part of the whole semiconductor boom.

That comes from its position in the chain. An accelerator without matching memory does not compute, and anyone who wants to know how many plants are actually being built finds an earlier pointer in the delivery volumes of the memory makers than in the announcements of the operators. That is why this date values less a single company than a narrative about the whole infrastructure.

The starting position before the figures

The starting position is unusual. According to market reports the price to earnings ratio on the basis of expected profits stands at about six, while the company holds around 18 billion dollars of customer prepayments and has booked more than 100 billion dollars of contractually committed minimum revenue.

Exactly here lies what is special about this cycle. The three large memory makers have shifted capacity from ordinary working memory to high bandwidth memory for AI accelerators. Spot prices for DRAM rose by almost 700 percent within a year.

The shifted capacity explains both sides of this move. What is manufactured for AI accelerators is no longer available for ordinary working memory, and the scarcity therefore also hits buyers who have nothing to do with the boom.

The year was still not calm for the share. Since the figures for the third quarter on 24 June it has given up around 11 percent. Rising prices and a falling share price in the same period are not a contradiction but the usual expression of the question of how long these prices hold.

Why a low price to earnings ratio is no bargain here

Both sides of this calculation stand next to each other at Micron. On one side a price to earnings ratio of about six that contains the expectation of falling profits. On the other side prepayments and minimum revenue that call exactly this expectation into question, because they already fix part of the future deliveries.

That is why the date on 30 September is more than a quarterly report. It is the opportunity to read from robust figures which of the two readings lies closer to reality.

Assessment

A price to earnings ratio of six alongside strong growth looks contradictory and is not. It describes the expectation that the current profits are not permanent.

Exactly there lies the tension before the date. If the company confirms the momentum, confidence in the whole infrastructure narrative grows. If doubts about demand arise, that hits not just one share but a whole industry.

Contractually committed minimum revenue running over years is the strongest argument against a sudden collapse.

Frequently asked questions

When does Micron report the figures

On 30 September. Broadcom already reported on 2 September, so the two most important dates of the month in the calendar of AI hardware are set.

What do 18 billion dollars of customer prepayments say

A customer prepayment is money a buyer transfers in advance to secure future delivery volumes. On the balance sheet it is at first a liability, because the goods are still outstanding. Economically it is a strong signal, because nobody pays in advance for something they can easily get elsewhere.

Why is the price to earnings ratio at about six despite the boom

Because the memory industry counts as particularly cyclical. Plants are very expensive and cannot be expanded in small steps, and if new capacity meets weakening demand, prices fall sharply. Investors therefore often value memory makers low at the peak of a cycle, because they expect profits to fall again.

This text is not investment advice. It reports verifiable figures and puts them in context.

This analysis is for information only and is not investment advice.