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The world turned upside down this quarter. We had huge gains in tech, but not the stocks you know and love. We had a resurgence in healthcare, but not big pharma. We caught a huge move in the industrials and in real estate, two groups we aren't used to seeing as winners.
And then there's the Magnificent 7, which collectively shed over $2 trillion in market cap just in the month of June, a collapse that calls owning the stocks of many of this market's long-term gainers into question. Basically, we've witnessed a changing of the guard: people from the Mag 7 to the companies that supply the Mag 7, as the former group spends fortunes on data centers and the latter coins money from the demand that the data centers bring.
So, in a decent day where the Dow advanced 136 points, the S&P gained 0.79%, and the Nasdaq jumped 1.52%, we need to go over what the heck happened to these losing stocks in the month of June. Then we'll review all the winners for the quarter. Some of these Mag 7 declines, they are just hideous.
The stock of Microsoft, for example, shed over 17% of its value this month, losing over a half a trillion dollars in market cap. Even though it has a decent cloud business, that's not enough to make up for its core software exposure. Wall Street has no use for software right now. Put aside this false narrative: software is a real good business.
If Microsoft wants to reverse its fortunes, it needs to do something bold, like acquiring OpenAI. If that company can't come public because of its severe losses, Microsoft has a stake in the company. It can make the trade happen that would allow it to scrap Copilot and replace it with uber-popular ChatGPT, or it can break itself up into extremely lucrative parts.
Yes, Azure, the cloud computing business, Microsoft business-to-business software, Microsoft consumer software, Microsoft cybersecurity, video games, LinkedIn, all best in field. Listen, after a 17% loss in a month, these guys would be crazy to keep doing what they've been doing. It ain't crazy.
Second worst performer: Amazon, off 12% from June. My trust owns Microsoft, owns Amazon. This is a tough one because the company's doing so much right, but they're not getting credit for their advertising business or the Prime offerings. Wall Street only seems to care right now about Amazon Web Services, which is actually doing much better than expected, but it isn't pleasing buyers.
Nobody seems to have any interest in what could be a potentially $50 billion semiconductor business that's under the same roof. Investors are worried here. Yes, they are. They are worried. Why? Because they want free cash flow. Amazon used to have it. They need to start making money with AI next year, no matter what, or else, because otherwise you can't justify the extreme capital expenditures.
We need to see a bountiful return, or the declines will continue and the stock could be punished.
Third, Meta, down 11% this month. Meta's going out of style because it's now viewed as nothing more than a pure advertising play with a lot of gross international product exposure. Again, false view, but right now that does not matter. People do not want to own this stock. It is spending too much money, and we don't know why. It hasn't been explained.
Well, what can Meta do? It has and is building a ton of data center power. I think Meta simply needs to say it's going into the cloud computing, Meta Web Services business. This can give you an instant 100-point gain, maybe more than that.
Fourth, Apple was down over 7% in June thanks to the skyrocketing cost of components, especially memory chips. I think it's vital that the US government allows Apple to buy low-end memory from China. Oh, and your phone is going up in price because the data center companies are bidding up the price for many of the chips that go into smartphones.
But Apple is the best AI at a very cheap price thanks to its deal with Google. See, this is typical, right? I mean, in the middle of the show, I've got it saying SOS. Stop it. Thank you. All right. Anyway, higher prices mean lower sales. That's what people think. We need to see the quarter and hear what they say in their forecast. And we need to get this to stop. Thank you very much. This is a real show. This is what happens.
Speaking of Google, parent company Alphabet was able to do a giant fundraise not long ago. That way you can spend all at once on data centers. Again, terrific news on one hand, but like Amazon, Meta, and Microsoft, that spending is a real blow to free cash flow, and you get a paused buyback. Hence, 6% decline.
That said, Apple's getting very little credit for YouTube, Google Cloud, or even search. It's absurd, but it doesn't matter. It doesn't matter because of the seemingly profitless CapEx.
Six, Nvidia. Nvidia down just over 5% this month. At these levels, the stock sells at an incredibly cheap 22 times earnings. Nvidia's got an insane amount of business. So, what's keeping a lid on the stock? Well, the company has some powerful detractors, mainly clients that feel they charge too much, like Google and Amazon and Tesla. Hey, by the way, they're customers.
The first two claim that they have better chips than Nvidia, even as they use Nvidia. Plus, there's Broadcom, vicious competitor, and CEO Hock Tan out there saying it can compete, it can take share from Nvidia. So, how can it change the stock's trajectory? Historically, I say they seem to keep reporting breathtaking results. The problem is the spectacular results haven't driven the stock higher.
Investors say it can't continue, and it needs to get many more clients away from the Mag 7, like sovereign wealth funds. They should be buying more, and it needs to buy back stock hand over fist, mimicking Apple during its historic run. The stock looks cheap.
In the end, I'm sticking with my view that you need to own Nvidia, not trade it, but that would be a lot easier if Jensen Huang and his fabulous team declared a much, much bigger buyback than they have. They got the cash. I repeat, though, the issue is the narrative.
Nvidia is at the heart of the data center. Almost every company with any component of the data center saw its stock soar this month. I know Nvidia stock is the biggest in the world, but it needs to show it by telling us its stock is the best value of anything. It keeps buying shares of other companies. Buy itself. That will change the direction of the price. It did for Apple. Do it for Nvidia.
Finally, there's Tesla. No issues here. I think it'll be bought by SpaceX sooner rather than later. But in the end, the Magnificent 7 ain't what they used to be. Investors fell in love with these companies for their impressive free cash flow. That's what drove their profits. Now they're spending all that cash on a race for AI supremacy.
And by the way, always lurking, of course, is Anthropic and OpenAI, powerful new competitors. The spend can only be defended by profitability, not press release.
All right. Now, let's talk about the winners. I can probably take my phone back, my watch back. No, let's leave it off. The winners for the quarter. The biggest gainers are the exact opposite of the Mag 7. They make products that are in short supply with demand that's off the charts.
The two biggest winners in tech right now of the second quarter are a pair of memory companies, SanDisk and Micron. We have Sanjay Mehrotra, the CEO of Micron, on later tonight. Last week they reported one of the biggest beat-and-raise quarters I've ever seen. Memory prices have gone through the roof. SanDisk has done well too. Both stocks have more than tripled in the last three months.
Next is Intel, currently my favorite stock. CEO Lip-Bu Tan has turned this company around. Intel has three major growth opportunities. First, semiconductors, leader in CPUs, central for AI and agentic. Second, chip packaging, bundling semis carries very big margins. Lip-Bu came from that industry. He knows it.
Finally, Intel's building foundries to actually manufacture chips. It could be the company to solve the memory shortage one day. National treasure.
Marvell next. It got optical networking, and most important, has the endorsement of Nvidia CEO Jensen Huang, who predicted it'll be the next trillion-dollar company. If he's right, there's a lot more upside. Marvell is just a $260 billion company.
Finally, AMD has both CPU and GPU, making it essential for the data center. CEO Lisa Su has done a remarkable job. I recommend you watch her recent commencement address at MIT.
Here's the bottom line. Wall Street's now rewarding tech companies with products in high demand and punishing their customers because they're spending too much and we don't know how it's going to be profitable. Some of you may think that's unfair, especially toward Nvidia and Apple. But the market has spoken, and I don't know if it'll learn any other language this next quarter, let alone the rest of the year.
My trust owns a lot of these. Go look them up. This is pain. I too am in the house of pain with some of these. Let's go to Rich in New York. Rich.
Hi Jim. First time, long time. I have a question on Netflix.
Stochastics at low, below the 20, 50, 200-day moving average, not overpaying for Time Warner, raised their prices. Is there something fundamentally wrong with Netflix?
People think the business has slowed. I disagree with that analysis. But you know what? The market has turned against the FAANGs. It's turned against the Mag 7s. It's caught up in that negativity, and it can't seem to shake the fact that it was trying to buy Time Warner, you know, trying to buy Warner Bros. Discovery. They can't seem to shake it. And that's all she wrote. Let's go to Greg in California. Greg.
I'm doing well. How are you?
Hey, big fan of the show. Been watching for a few years. My mom got me into the show. She's been watching since day one, man. So, big shout out. Big shout out.
I'm shouting out to your ma. I'm shouting out to your ma. Okay. Tell her I love her. All right. I mean it a lot. What's your mom's name? What's her name?
Kyle. Hey, what the hell? Why not? Kyle. Yes. Yes. Shout out to Kyle.
Booyah from Kyle. So, anyways, I'm calling about Corning. You know, it's obviously been doing really well the past few days. You know, I got in a few months ago and I've been seeing a steady growth. It still just seems to be doing massive swings throughout.
Okay, listen to me, Greg and Kyle. Craig and Kyle. Okay, here's the deal. We actually sold some for the trust today. It's been a big win. I just castigated myself over Microsoft, over Nvidia, over Apple, over Meta. What else? How about Amazon? Yeah, I'm the biggest idiot in the world, but we own a lot of Corning too. Kyle knows that. She's a member of the club, I'm sure. I mean, like, I'm sure. All right. Okay. I'm sorry I'm so fired up, but I've been on vacation. What did you expect?
The script is flipped in the tech trade. The suppliers are winning right now, and the old leaders have to earn their way back. New tricks work when your stock's down. On Mad Money tonight, forget earnings. Could the next big catalyst in this market be M&A? I'll tell you why the takeover wave is just getting started and how you can profit from it.
Then, after a massive run fueled by the AI trade, can Micron stock keep delivering? I'm sitting down with the CEO to discuss last week's blockbuster earnings. Plus, I'm getting the state of small business with the CEO of Paychex. I suggest you stay with Kyle and stay with Cramer.
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When we look at what's behind much of this year's gains, we often miss arguably the biggest driving force outside of tech and the data center. I'm talking about the takeover boom. $1.2 trillion in US M&A activity through the first five months of this year, almost double what we saw in the same period last year. And it's only going to get more heated because of a big change in the regulatory environment.
The Supreme Court just came out with a shocking decision that allows the president to fire any commissioner of any independent agency aside from the Federal Reserve. Given that President Trump seems to love takeovers, he can now ensure they happen by fully staffing the Federal Trade Commission and other regulatory agencies that have been anti-combinations with his own people.
Plus, the Justice Department's antitrust division just let the media know that it clearly wants to avoid complex, expensive trials on the M&A front. It almost seems like a multi-year holiday from antitrust enforcement, doesn't it? The impact is simple. I think we're about to see a wave of takeovers in banks, pharmaceuticals, tech, oil and gas, retail, and telecommunications.
Something akin to the deal activity we already saw in the first several months of the year, probably more. So, let's start with the banks. For years, there's been an informal rule that no bank can have more than 10% of the nation's deposits. We have thousands of banks in this country. I think we're going to see a wave of takeovers in this group, as that informal rule will most likely fall by the wayside.
That's what's driving the incredible run in the regional banks that you've been seeing lately. Plus, with this wave of mergers, we're going to see some spectacular returns from Goldman Sachs and Morgan Stanley, both of which have huge M&A advisory businesses. You need exposure to this group because the banks making these acquisitions can make fortunes from cost cutting.
Second, big pharma used to buy little pharma, like biotech, by the boatload, but that ended under the Biden administration, which was extremely hostile to virtually all mergers, particularly this kind. Now, beginning this last quarter, we're seeing not just a reversion of the old days, but the possibility of a dramatic increase in deals.
I expect big pharma will buy all sorts of biotechs, but I also think that they're going to start buying each other again. It's just too easy to create wealth by making acquisitions and then using AI to bring down costs.
I know the president was blasting the oil companies about high prices today, but given the administration's regulatory appointments, we should see a gigantic number of deals, not just between the biggest companies buying smaller companies, but even mergers among the giants. That's right, to rationalize drilling and oil services in an increasingly diminished state of reserves.
How about retail? You know, we have way too many stores in this country, as retailers have resisted takeovers for the last couple decades. Before that, retail deals were the staples of M&A. You used to see one every five weeks. The opportunity to consolidate, especially in grocery and hard goods, will be irresistible, especially at a time when Amazon's so dominant. Its rivals need to join forces if they want to stay relevant.
Hey, memo to some of these guys who were turned down by the previous administration: try it again. Finally, the specter of Starlink could cause a rethink of entire industries, from cable, as we saw with Comcast split up yesterday, to satellite, entertainment, telecommunications. You cannot compete against Elon Musk's Starlink unless you have a colossal amount of scale, much more than any of these companies has right now.
Telco mergers that would have been unthinkable for decades could easily get the green light under the Trump antitrust regime. You need to be able to compete with Starlink. Look, I still love tech. Later tonight, we're going to hear from one of the greatest wealth creators of all time, Sanjay Mehrotra, CEO of Micron.
At this rate, I see no end to Micron's rising profits, which should translate into a rising stock price. But the bottom line: it won't just be earnings driving stock prices higher in the second half of the year. It'll be an extremely robust M&A pipeline. Takeovers are a terrific reason to stay long stocks, especially when the White House has very little interest in blocking these deals on antitrust grounds.
Put these picks on your shopping list and prepare to buy them when the market takes one of its typical second-half swoons. Mad Money's back after the break.
Coming up, Micron has emerged as one of the stock market's biggest winners this year, but can the company keep building even greater gains? Cramer's asking the top brass next.
We need to talk about the biggest story in this market: the memory chip shortage that's propelled Micron into the trillion-dollar club, with its stock up more than 300% year to date. Now, in the old days, Micron was widely seen as a commodity chipmaker. No more. There's so much demand for high-end memory for the data center, and the company's chips are much more proprietary.
So proprietary that they're practically printing money these days, and I think they deserve to. Last week, Micron reported a blowout quarter, one of the biggest beats I've ever seen in my whole life, racking up $41.5 billion in revenues when Wall Street was only looking for $36 billion. That's 74% growth just versus the previous quarter.
They earned $25.11 per share, more than four bucks ahead of expectations. Gross margins 85%, staggering for tech. And the current quarter is on track to be even better because Micron keeps signing up what are called, well, strategic customer agreements with businesses that are desperate to lock up supply of their chips.
There seems to be no end in sight here for demand, but even after this incredible run, the stock sells for less than eight times earnings. Can it keep running? Let's check in with Sanjay Mehrotra, the chairman, president, CEO of Micron, to find out. Mr. Mehrotra, congratulations on the quarter and welcome back to Mad Money.
Thank you, Jim. It's great to be back on your show.
Well, first I want to start with something that just occurred that I think is really a sign of what you want to do with our great country: this $250 million investment in Trump accounts reaching 1 million children, families in the future workforce. Why did you do it?
Jim, we are very excited as part of America's 250th celebration to announce today that Micron will be investing $250 million to support 1 million children in seven different states where Micron operates, 21 different counties. And we are doing this with the seed money for 200, with $250 into Trump accounts of children. And this is really to build the future of America. The children are the future of America. Micron is not a company just about technology and business. We are very much about people and about communities.
I know that about you, and I know that to be the case for many, many years now. This is your trillion-dollar moment, Sanjay. So tell us what you think, how that came about, and whether you think it's sustainable.
You know, very pleased with the work that our 55,000 team members worldwide have done. Micron is firing on all cylinders. It is based on the value of memory. Memory has become today a key enabler in the AI era, from data center to edge, from servers to smartphones to PCs to automobiles, industrial and consumer applications.
Every AI system, regardless of the device it is in, requires more memory at higher performance in order to really bring out the full potential of AI capabilities. So, of course, memory has always been valuable in the past, but the value of memory is not like it ever was. It's continuing to increase. Memory today has really become essential. Its role in this AI ecosystem is elevated.
And you know, Jim, AI is in very early innings. There is a lot of opportunity ahead for our customers to transform the world with their solutions, drive economic growth globally. It all needs memory. So the demand trends are long-term secular strong demand trends. Supply, we have talked about the constraints, and that environment of demand and supply is such that we see it going beyond tightness, going beyond 2027.
You use the keyword secular, secular growth. People always associate your company with cyclical growth. Still, even with this eight-times-earnings P/E multiple, there are a lot of people who think it has to come down. But you have strategic agreements that would indicate that it doesn't have to. And you keep saying no end in sight, can't find it.
You know, we have signed these strategic customer agreements with customers addressing data center, automotive, and consumer markets. So these are very important. And of course, when you look at the data center market, yes, it's become the largest market for memory and storage, but other markets are large too. Micron has 40% of its revenue coming from consumer, automotive, and industrial markets.
So these are very important markets. These strategic customer agreements reflect the confidence that the customers have across the end markets in their plans for products to address the AI opportunity. So this is really the best reflection of how customers value our memory.
Okay. So how is it possible? I know I've talked with you quite a bit that most of the companies in your end, the suppliers to the data center, Lam, KLA, AMAT, really didn't see it coming. Almost no one saw it coming because I think a lot of people were saying, wait a second, are these guys hoarding? Is it an oligopoly? Is it oligopolistic pricing? But I think that it was impossible to see this demand.
You know, certainly even our customers could not forecast this demand. And you know, certainly when we were coming out of the 2023 time frame, which is when actually the industry, certain customers drove pricing significantly down in our industry, and that of course resulted in significant negative gross margins, you know, for certain customers, certain products, and that really impacted the investment capability of the industry.
If your companies were losing money, you couldn't afford it.
Exactly. Right. They couldn't afford it. However, Micron absolutely invested even with the headwinds of the industry pricing driven by certain customers in our industry, it really impacting our profitability and the balance sheet. We invested even in the 2023 time frame $10 billion towards leading in memory technology as well as memory supply. Of course, those investments were significantly cut back from the year prior.
Jim, in '23 our prices came down to one-third of what they were in '22. Customers drove those prices to these unproductive levels, yet Micron had the vision of investing for the future.
You had the vision because I remember trying to pin you down. You told me I was a little too optimistic, but you were going to have to spend anyway. But you didn't have the cash flow. Now you got the cash flow. What are you going to do with it?
So I have to tell you that that time frame definitely impacted the supply capability in the industry. Of course, now we are investing. We are investing $200 billion of investments right here in the US, investments globally across where Micron operates, has manufacturing plants. And these investments are very much geared toward trying to bring on supply, but it takes a considerable period of time because that requires greenfield supply.
And of course, we will invest in the business, we'll invest in R&D, we'll invest in manufacturing, we'll invest in innovation, product leadership, and bringing that supply in line with the market demand. And excess cash, we will return to shareholders.
All right. Well, keep that thought. We're going to have more with Sanjay Mehrotra, CEO of Micron, after the break.
While we've got Sanjay Mehrotra, CEO of Micron, with us, we need to talk about when, if ever, we're going to resolve this memory chip shortage. Right now, Micron is investing heavily in semiconductor manufacturing and R&D in the United States. Plan to spend $200 billion, just heard that, across the United States, creating more than 90,000 jobs in the process, although it's going to take years before we see any output. Maybe one of the largest peacetime job creators in the history of our country.
So let's get back in it with Sanjay Mehrotra, the chairman, president, CEO of Micron, because this is becoming a huge issue for the entire economy. Sanjay, how can we solve this?
So Jim, we have talked about the value of memory in the AI era, and we have talked about the secular demand trends. And now let's talk about supply constraints. The industry needs greenfield capacity. That means new construction of clean rooms. That's where Micron is investing heavily in, and those clean rooms take a long time from shovel in the ground to first wafers out.
We had the vision of investing way back when, and President Trump and his administration actually have helped us accelerate our plans, accelerate our investments. We are very much focused on investing as well as accelerating the investments. Our Idaho fab will have first wafers out in the middle of next year, and production after qualification by customers will start ramping up in the 2028 time frame primarily.
Second Idaho fab, you know, planned with the Trump administration, also will come about by end of '28 time frame. We have in New York groundbreaking occurring earlier in the year, and where that will begin concrete pour later this year, and it will follow our Idaho fabs in terms of ramping supply. We are investing globally as well in order to bring supply as fast as possible.
So one aspect that's important to consider is that fab capacity, new capacity that is now required across the industry, it takes a long time to build. That's why we say tightness continues beyond '27. But the second fact is that the memory technology is very complex.
It's not like the old days, right? HBM is hard to make.
This is, you know, some have called it a technical marvel. Some have called it a combination of magic and science. This is not your grandfather's memory. This is extremely advanced memory. Complex stuff. A lot of intellectual property. Micron has patents that are now approaching 65,000 patents. HBM, high-bandwidth memory that you just talked about, it takes a lot more wafers to produce than the standard memory, and that's putting a lot of pressure on the supply as well.
Okay, we know that Morris Chang, a man we all respect, the founder of TSMC, does not trust our country to make it in a reasonable, logical manner, 50% higher cost than in Taiwan. Listen to this: it'll be a very expensive exercise in futility doing what you're doing. What do you have to say to that?
What I will tell you is that Micron has tremendous experience operating across the globe over the years in some of the most advanced semiconductor manufacturing that is out there. We, of course, have been manufacturing right here in Manassas, Virginia, products for long, what is called long-life-cycle memory products that go into automotive, defense, medical, aerospace. By the way, with the Trump administration, we have increased our investments there as well. So Micron has strong experience here in the US.
But on a tag, I mean, are there enough people? You need to hire a lot of people. I don't see the people with the qualifications that you need. How are you going to change that?
Micron has the world's most advanced R&D fab in Boise, Idaho, which is where Micron started. That's where the headquarters are. That's where the most advanced R&D is developed for memory. And now we are doing manufacturing, bringing it to Boise, Idaho, in the future to New York, and then Manassas, Virginia.
We, in addition to the $250 million into Trump accounts we talked about, I want to point out Micron has committed to invest $300 million in developing the pipeline of talent, apprenticeships, junior colleges, curriculum for semiconductors in universities, and reaching out to the talent, training the talent. This is very important, and that talent investment in that talent is essential. We are focused across the country in developing the talent.
All right, let's think about this in a little more existential, philosophical way. The data centers are bidding up a lot of things. I could say that they're causing a wave of inflation. My cell phone is going up dramatically. I could say that it's because of Micron. Or I could say that the data centers are bidding everything up. Maybe they should be offering some sort of stipend surplus to people to make it so our phones don't get too expensive. What do we do? Things are going up too quickly in cost.
So I will point out that data centers and AI and US leadership in AI is, of course, critically important for our economic interest here in the country as well as national security. Advancement of AI in the data center capability is really critical, ultimately enabling the consumers, users of phone devices, to have the kind of experiences that in the past either were not possible, were too difficult, or were too costly. Now AI is creating opportunities across the board.
Second, I would tell you that for our critical markets like automotive, we, of course, sell at lower prices compared to the data center. I'll also say that in smartphone, our products sell for less compared to the data center products. So, of course, diversification is important. That's why I was pointing out to you earlier that 40% of our business is pretty much towards consumer markets such as automotive and smartphones and PCs. So maintaining this diversification is extremely important for us.
Last concept, last question. You and I have talked for a long time about the notion of Korea being dominant. Have you, with your R&D, have you, with your fabs, passed SK Hynix? Are you better than Samsung right here? Tell me.
I'll tell you that today, Micron, when it comes to DRAM as well as NAND technology, we are a clear technology leader. We have...
But that's not always been the case under previous CEOs.
That is so. Over the course of the last few years, we have established four successive generations of technology leadership in DRAM. Today, we are a technology leader in NAND as well. Not just technology, product leadership as well across DRAM, across HBM, across NAND.
We just announced in our earnings call that our HBM4 product, again the most complex product in the world in terms of memory to produce, Micron shipped at the time of our earnings call, we said we have already shipped to date more than $1 billion. And I can tell you, Jim, our technology position, our product position, our momentum on products such as data center SSDs as well as these HBM shows Micron momentum. Today, we are extremely competitive, well positioned.
And you're the only one who's doing this in our country, right?
