The stock market feels to me like it’s in an interesting place right now. Investors are looking for signs of a bursting bubble… but they’re not finding them yet.
The latest results from Micron Technology (NASDAQ:MU) are a case in point. They’re nothing short of spectacular, but their real significance might be much wider.
Micron’s results
Micron’s results were – in a word – epic. The company blew past some pretty optimistic expectations:
| Metric | Expected | Actual | 2025 Comparison |
|---|---|---|---|
| Revenue | $35.69bn | $41.46bn | $9.3bn |
| (Adjusted) EPS | $20.49 | $25.11 | $1.91 |
| Gross Margin | 80% | 85% | 39% |
Revenues grew 346% and earnings per share increased by 1,215%. And this wasn’t – in my view – the most impressive bit.
Pretty much everyone knew Micron was set for a blowout. Companies are building data centres and they require memory chips. But what really impressed me was the firm’s forward guidance. The momentum looks set to continue:
| Metric | Expected | 2025 Comparison |
|---|---|---|
| Revenue | $50bn | $11.32bn |
| (Adjusted) EPS | $31 | $3.03 |
| Gross Margin | 86%% | 46% |
The reasons are straightforward. Micron expects strong demand to continue – and its new HBM3E and HBM4 chips are sold out through 2027.
Investors looking for signs of weakness didn’t find them in this report. And I think that matters even for those of us who don’t own the stock.
The state of the stock market
According to the latest data, the risk investors are most worried about is a second wave of US inflation. But an artificial intelligence (AI) bubble is second.
Source: Hedgefundtips
Furthermore, concerns about an AI bubble are growing. And we all know why – stocks like Micron have been surging to what look like very optimistic levels.
I think investors know how this ends. It ends the way the bubble around vaccine companies ended at the end of the Covid-19 pandemic. Surging demand for vaccine supplies boosted sales, margins, and multiples. But all of this reversed dramatically when things got back to normal.
I can’t help but get a sense that investors know something similar is going to happen with semiconductor stocks. What they don’t know however, is when.
If Micron’s results are anything to go by, it’s not happening in the next three months. But does that give investors a license to buy the stock?
Not for me
Investors look to me like they’re trying to figure out how long the data centre rally can continue. And that can be a dangerous game. I think Warren Buffett said it best. The ‘Oracle of Omaha’ likened this kind of thing to Cindarella at the ball:
“They know that overstaying the festivities … will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”
Micron’s latest results just told investors that it’s not midnight yet. But nobody knows when that time is coming. It’s not just Micron, by any means. There are plenty more stocks that have been surging recently that I think investors are watching nervously.
That’s why I’m focusing my own attention elsewhere. After all, it’s not as though I can’t find opportunities I like the look of in today’s stock market.
Should you invest £5,000 in Micron Technology right now?
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Stephen Wright does not own shares in any of the companies mentioned.
