We’re adding a critical enabler of AI computing to our Bullpen watchlist
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Stocks are dipping on Thursday, led to the downside by the Dow Jones Industrial Average . The S & P 500 is digesting its run to new highs for the second session in a row. Oil and bonds are a slight headwind, with energy prices moving higher as the market awaits more clarity on a deal to reopen the Strait of Hormuz and allow safe passage of oil tankers. Bond yields are up, with the yield on the benchmark 10-year Treasury pushing back above 4.65% We’re looking to add new names following some recent adjustments. Honeywell Aerospace and Procter & Gamble are out of the portfolio, while our remaining Dover position is held for sale. Against this backdrop, we’re adding the memory-chip maker Micron Technology to the Bullpen. This was an idea we suggested after learning that the forced selling by a highly levered, AI-focused hedge fund had ended, creating a clearing event to repurchase many AI stocks that had fallen between 30% and 50% from their highs. Micron has had a strong rebound since the morning of July 30, but shares are still 25% below their record close of $1,213.56 on June 25. The broader memory semiconductor market is dominated by three big companies: Samsung Electronics and SK Hynix in South Korea, and Idaho-based Micron here in the U.S. Within the memory market, the main two products to know are NAND and DRAM. Think about NAND as more of a longer-term storage, like a flash drive. DRAM is what’s considered working memory, like the RAM in your computer. A specialized form of DRAM is HBM, or high-bandwidth memory, which is the key enabling technology for modern AI workloads. AI accelerators, such as the graphics processing units (GPUs) made by Club name Nvidia and rival Advanced Micro Devices , do the math that underpins AI computing, but they rely on HBM to store and feed them data. Since the AI boom took off, DRAM and NAND industry demand has significantly exceeded industry supply, and this ongoing shortage has led to huge price increases and exceptional margins at Micron. The company said on its earnings call in June that these tight industry conditions are expected to persist beyond calendar 2027 because of AI-driven demand and structural supply constraints. The key concern with Micron is that the memory industry has historically been a boom-and-bust business, and many investors believe this cycle won’t be any different. That skepticism helps explain why the stock trades at an extremely cheap price-to-earnings multiple of less than 9 times calendar year 2027 estimates despite strong fundamentals. However, Micron has been trying to ease those concerns by signing strategic customer agreements, or SCAs, to fundamentally change its business model. The company has signed 16 agreements so far, and the typical deal is a five-year term from calendar 2026 through the end of 2030. These agreements represent about 20% of its DRAM volume and 33% of its NAND volume. They are structured as take-or-pay agreements, with the largest contracts featuring a price ceiling set at the second-quarter market price and a floor that still guarantees Micron strong margins. While the pricing structure puts a ceiling on margin expansion, it also provides greater durability, allowing margins to remain elevated for longer than in previous cycles. There are no club earnings for the rest of the week. After the bell on Thursday, we’ll see earnings from DraftKings , Applied Optoelectronics , Airbnb , MP Materials , Atlassian and Cloudflare . Before the opening bell on Friday, Take Two Interactive , Oklo and Vistra . Also Friday is the all-important nonfarm payrolls report. The U.S. economy is expected to have added 95,000 jobs in July, according to economists polled by FactSet. The unemployment rate is expected to be unchanged to 4.2%. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
