Zuckerberg Just Gave Away Why You Should Buy Micron, Not Meta

Meta is expanding data center capacity and increasing spending while also raising its infrastructure capex forecast for the year. The increase is attributed mainly to higher component costs, particularly memory pricing. Data center capacity does not scale linearly with spending because component prices can exceed budgets even when buildout plans are constrained. As hyperscalers continue large infrastructure buildouts, memory demand remains strong and component costs keep pressuring spending. Micron is presented as a way to benefit from this environment, with the claim that its valuation is relatively low versus expected pricing power and growth. The piece cites strong recent stock performance and projects high EPS and revenue growth driven by ongoing hyperscaler demand.

"“...we are increasing our infrastructure capex forecast for this year. Most of that is due to higher component costs, particularly memory pricing.”"

"Most investors tend to think data center capacity increases linearly with spending, but this is not the case. In fact, companies like Meta are finding out that even if they are keeping their data center plans constrained, component prices are going out of budget due to the enormous buildout. This only means that you're going to see higher and higher spending on these data centers from companies like Meta."

"Buy Micron, not Meta stock is up 841% in the past year and is now officially a company worth over $1 trillion. But the stock is far from pricey when you consider just how much pricing power and growth potential the business has. Micron trades at a mere 9 times forward earnings, and even this may end up proving to be an underestimate."

"Investors are looking at 118% annual EPS growth rate (minus non-recurring items) and a revenue growth rate of 68% annually. As long as this buildout continues, I have every reason to believe that Micron will outdo these growth figures. There's simply too much demand from hyperscalers. By the time this “cycle” ends, you might be losing out on tremendous gains."

Read at 24/7 Wall St.