Episode 955: Martin Shkreli Discusses If This Is Peak Cycle For Memory Stocks

**Martin Shkreli** (0:00)
Yeah, I think the memory stuff is very instructive because like, here you have this like, kind of retarded trade, that, you know, basically everyone in the world knows there's this big bottleneck and it's impossible to make or get RAM right now.

**SPEAKER_2** (0:16)
Yeah.

**Martin Shkreli** (0:16)
And like, how do you treat that as an investment? Like I actually started in 2000 around a very similar dynamic. It was actually Micron as well.

**SPEAKER_2** (0:25)
Really?

**Martin Shkreli** (0:26)
Oh, yeah.
And DRAM prices were going through the roof, and Micron earnings were really high. Micron wasn't performing well, and I was trying to figure out for my bosses, like Micron's like four times earnings. I don't get it. And they're like, look, Micron's going to lose money next year.

**SPEAKER_2** (0:40)
Yeah. Since it's a commodity? Yeah.

**Martin Shkreli** (0:43)
Yeah. It's just a boom-bust cycle. And if you ever look at like international paper or mining companies or like any company like that, they make money in the boom year and then lose money in the bad year. You're lucky if you break even in the bad year because you have all these plants lying around empty. Yeah.

**SPEAKER_2** (1:00)
It's a huge property, plant, and equipment. It's huge.
I mean, the way I guessed, well, sophisticatedly guessed my short was, what is the lead time for supply to catch up? And I did a little bit of research, and people were saying two years, three years. I'm like, okay, well, they're pricing it as if there's going to be a shortage forever. CapEx is only going up. And that's why when Zuckerberg was like, we'll rent some of it out, that was the first, that was the crack. And then it's like, okay, people started living in reality. And then when you look at the reality, you go to your point, which is like, well, this is cyclical. And the cycle could be at the beginning of the end.

**Martin Shkreli** (1:42)
Yeah. And when you're a Chinese competitor, for example, you will print out as much mandat or flash as you want, just because the, you know, your margins are so high.

**SPEAKER_2** (1:52)
Yeah.

**Martin Shkreli** (1:53)
You know, you're happy with 50% margins.
You know, Kyosha and Sandus, maybe not, you know, but you are, so you don't care. And then Kyosha and Sandus have to match the price. Yeah. And then output increases.

**SPEAKER_2** (2:04)
It's a race to the bottom, because it's a commodity.

**Martin Shkreli** (2:07)
And, you know, you don't want to race all the way through. But I think there is, you know, a willingness to, you know, engage in a price war. Now, we will have to see, because Chinese aren't stupid. And in a lot of ways, like, you know, there could be this new, as I said earlier, a permanent new shift. I mean, one, the complexity of these things has grown a lot since I was a kid. It's much harder to make DRAM. It's much harder to make Flash. And, you know, certainly not trivial. Huge investments required.
Asml is not making new machines very quickly. So it's not like you can explode output. But I think that, and I think AI is, you know, obviously here to stay. We're going to be using AI, you know, code and to do all kinds of things for a really long time. The algorithms are going to get efficient, you know, but it feels like on balance, like supply doesn't have to catch up.
You know, that's not a permanent given. You know, like there is this like, we have to wait and see what happens.

**SPEAKER_2** (3:12)
Yeah.

**Martin Shkreli** (3:12)
Because like, those two cycles are alike, right? And if you think about semi-cycles, like there has been growth over time. Yeah. Even though there's been cyclicality, like the general trend is up. And you can't deny that, you know, in terms of like, okay, so Micron has two good years left, right?
I know Micron better than Sandisk, but we could do Sandisk too. Sandisk makes 200 bucks next year in earnings, another 200 bucks. So they make 400 Now the enterprise values say 700
So now what? What do they make from here? 50, is it 100? Is it zero? And obviously, if it's 50, it's not that cheap. It's, you know, 12 times earnings. You know, now the 200 and the 400 has been removed because that's cash now, right? So they make 200, they make 200 The market cap's kind of, you know, the enterprise value's dropping because that cash is retiring the shares or paying a dividend or whatever. So now you've got post-bubble sand disc. Now, what if the bubble's three years? Then you're in pretty good shape. The bubble's four years. You're basically, you know, free money.