Micron is mentioned in the context of semiconductor earnings and the impact of AI spending. The letter discusses the potential decline in AI spending and its effects on semiconductor companies, including Micron, but does not provide a specific bullish or bearish argument regarding Micron's future performance.

We added Micron to the portfolio towards the end of 2025. This quarter, Micron’s shares returned more than 240% after results reinforced the growing strategic importance of memory to the AI infrastructure buildout. Its earnings benefited from stronger pricing, improving demand and a generally more constructive outlook, as demand for memory continues to outpace industry supply additions. Growth is being driven by high-bandwidth memory for AI accelerators, agentic workloads and data caching. Micron’s latest energy-efficient memory products also allow AI workloads to run with higher performance and lower power consumption, while long-term customer agreements may improve earnings visibility and reduce cyclicality.

Micron, the only U.S. producer of DRAM memory, has gone from being marginally profitable to earning more than Apple or Microsoft. Memory prices are now high enough to inflict damage on consumer electronics markets and prompt AI model companies and chipmakers to redesign their technology. Micron’s entire manufacturing PP&E footprint is approximately $60 billion, versus a market cap of $1.2 trillion. The company will make enough money over the next year to replicate its entire footprint multiple times. Today’s extraordinary profits and prices are going to kick off an equally extraordinary capex cycle. Micron, along with Samsung and SK Hynix, is beginning to add capacity, though too slowly to keep up with demand.

Micron is positioned to benefit significantly from the ongoing AI-driven spending surge, with its pre-tax cash flow projected to rise dramatically from $2.5 billion in 2023 to an estimated $100 billion in FY26. This growth is fueled by the increasing demand for memory chips in data centers, which are experiencing extraordinary scarcity profits. The company had the largest weight in the Russell 1000 Value Index and was up approximately 300%, contributing nearly 20% of the Index’s return. We believe that these earnings, while currently driven by scarcity, will normalize as supply catches up, but Micron's strong position in the market gives it a durable quality advantage.

Micron Technology is our largest position, reflecting our belief that the economics of the memory cycle may be changing structurally. AI is driving demand for memory, particularly high-bandwidth memory (HBM), while also consuming manufacturing capacity. Micron's strategic customer agreements provide revenue visibility and reduce the risk of oversupply. In fiscal Q3, Micron reported $41.5 billion in revenue and $25.11 in adjusted EPS, generating $18.3 billion in free cash flow. We believe the market underestimates the potential for sustained earnings growth, as Micron's business quality and predictability are improving, making it an asymmetric opportunity.

Focus Wealth Management's portfolio manager Alexander MacDonald highlighted Micron Technology Inc's latest quarterly results, emphasizing the significance of the company's newly announced long-term agreements. These agreements contribute to the argument that the current CapEx cycle may be more durable than previously thought, suggesting that Micron is well-positioned to benefit from the ongoing AI boom and the associated demand for semiconductors. The manager believes that the companies at the center of this boom, like Micron, possess powerful moats and strong free cash flow, enabling them to sustain heavy spending for longer periods.

Micron Technology delivered exceptional returns during the second quarter, with shares advancing over 200%, as the company reported quarterly revenue that tripled versus the prior year and came in nearly $7 billion above the company's revenue guidance. Quarterly results were powered by insatiable demand for high-bandwidth memory across product lines, and the company confirmed that its entire calendar 2026 high-bandwidth memory supply remains fully allocated to strategic AI partners including Nvidia. Micron guided forward-looking quarterly revenue to $50 billion, which approximated full-year revenue for the company just two years ago.

Micron is described as a historically cyclical memory business, with its earnings profile experiencing ups and downs. The letter discusses the cyclical nature of memory companies and the challenges in valuing them, particularly during boom-and-bust cycles. It highlights the recent spike in demand for high-bandwidth memory due to AI, which led to a global shortage and a forecast of significant free cash flow for Micron. However, the letter also expresses skepticism about the sustainability of this trend, noting that high profitability in the sector tends to attract competition, which can lead to oversupply and reduced margins.

Micron is positioned to benefit significantly from the ongoing AI infrastructure build-out, as evidenced by the expected growth in its capital expenditures. The company is projected to grow capex by 159%, reflecting the strong demand for high-bandwidth memory (HBM), DRAM, and NAND driven by AI applications. This demand is compounded by supply constraints, including cleanroom limitations and long construction lead times, which are expected to keep server demand elevated. As the semiconductor cycle becomes more structurally driven, Micron's investments are likely to enhance its competitive position in the market.

Micron's current gross margins are at unprecedented levels, exceeding 80%, but this is not sustainable. The manager argues that the earnings boom is driven by a pricing environment with no precedent, and the historical tendency for margins to revert to levels consistent with the cost of capital suggests that current valuations are risky. The cyclical nature of the business means that buying at these elevated prices lacks downside support. The manager believes that while the memory business has improved structurally, the risk of a downturn remains significant, and thus, they are trimming their position.