The amount of gold in the Association: 22 billion dollars in advance for clients, non-cancellable contracts, and locking in the "most profitable in history."

Original by: Dragon Sword

Original source:See you on Wall Street

The client first paid $22 billion in deposits, signed irrevocable long-term contracts, and accepted a much more favourable pricing framework for American light than at any other time in history — the core terms of America’s most recent long-term strategic client agreements (Strategic Customer Agreements, SCA)。

According to wind chasers, on June 25th, Barclay, Morgan Stanley, Morgan Chase collectively saw it as an agreement to “change the rules of the game”. In its research, & nbsp; Harlan Sur, Morgan's Chase Semiconductor Analyst, characterised the SCA as a “fundamental shift” from a cyclical large-scale commodity supplier to a long-term supplier with a significant downward spiral of multi-year contract protection, income and profits。

The value of these contracts is as follows:THE FIRST IS THE SIZE OF COVERAGE, WITH SIGNED AGREEMENTS CORRESPONDING TO ABOUT 20 PER CENT OF DRAM AND ABOUT ONE THIRD OF NAND; THE SECOND IS PRICE BINDING, WITH 14 AGREEMENTS MEASURED BY MINIMUM COMMITMENTS AND PRICES, CORRESPONDING TO A CUMULATIVE MINIMUM INCOME OF ABOUT $100 BILLION; AND THE THIRD IS FOR CLIENTS TO MAKE A TOTAL OF $22 BILLION IN DEPOSITS AND FINANCIAL COMMITMENTS. FOURTH, THE CORRESPONDING MĀORI RATIO OF THE LOWER PRICE LIMIT OF THE AGREEMENT IS “WELL ABOVE HISTORICAL PEAK” (ABOUT 62 PER CENT), WHICH ESSENTIALLY LOCKS A HIGHER PROFIT LINE FOR BEAUTY LIGHT。

16 CONTRACTS COVERING 20 PER CENT OF DRAM AND ONE THIRD OF NAND

AS A RESULT OF THIS DISCLOSURE, 16 SCAS HAVE BEEN SIGNED ACROSS THE THREE MAIN MARKETS OF DATA CENTRES, CONSUMER ELECTRONICS AND AUTOMOBILES。

THERE ARE FOUR LARGE CUSTOMERS IN THE CUSTOMER DISTRIBUTION (THE MARKET IS GENERALLY PRESUMED TO INCLUDE LARGE CLOUD MANUFACTURERS AND MAJOR CONSUMERS OF ELECTRONIC OEM),3 HOME-BASED CUSTOMERS, AND THE REMAINING NINE ARE SMALLER CUSTOMERS IN THE AUTOMOBILE INDUSTRY。

The duration of the agreement: data centres and consumer electronics contracts are five years, covering 2026-2030 years; automobile contracts are three years。

COVERAGE SIZE: THESE 16 AGREEMENTS COVER APPROXIMATELY 20% OF DRAM DELIVERIES AND ABOUT ONE THIRD OF NAND DELIVERIES。

ACCORDING TO BARCLAYS, MANAGEMENT INDICATED THAT WHEN ALL PLANNED SCAS WERE SIGNED, IT WAS EXPECTED THAT MORE THAN 50 PER CENT OF CORPORATE INCOME WOULD COME FROM THESE AGREEMENTS. OF THESE, AGREEMENTS INVOLVING FIXED OR INTER-PRICE ZONES ARE EXPECTED TO ACCOUNT FOR ABOUT 40 PER CENT OF CORPORATE INCOME。

$22 billion in deposits to increase the cost of default: clients pay first, American suspense, due and payable

16 Under the signed agreements, US$ 22 billion in cash deposits and other financial commitments — $18 billion in unrestricted cash and $4 billion in letters of credit — will be received by US$ 22.0 billion。

The funds were held by American light and remained on the balance sheet for the duration of the contract, returned to the customer upon expiry and returned to the rhythm “back-end weight”, i.e., the second half of the agreement, in large quantities。

This money cannot simply be considered as income received in advance。It really works by raising the cost of a client's repentance。

With regard to the binding nature of the contract, the Morgan Stanley Review directly quotes management statements at the conference:“These contracts are irrevocable.”If the customer is unable to take delivery of the goods at the agreed rate, Mei-hong may take action on the deposit. For beauty light, this amounts to an additional bond for part of the demand in the coming years; for customers, it is a binding cost for certainty of supply。

THIS ALSO EXPLAINS WHY CLIENTS ARE WILLING TO ACCEPT PRICE-SHARING AND DEPOSIT ARRANGEMENTS. AI SERVERS, DATA CENTRES SSD, HBM AND HIGH-END TERMINAL DEMAND PULLS DOWN AND LOCKS ARE VALUABLE WHEN STORAGE SUPPLIES ARE TIGHT。

Pricing structure: capped, but bottom-bound Māori ratio “well above historical peak”

THE SCA FRAMEWORK FOR PRICING IS DIVIDED INTO THREE CATEGORIES:Fixed prices, price bands with floors and floors, or reference market prices which fluctuate within the nearest zone。

Price cap component:For stock products, the price ceiling is based on market prices in the second quarter of 2026. This provision has been interpreted by some marketers as a "active lock-up of price rises" and has led to some disagreement。

But the price floor is the real highlight:The gross domestic product ratio of the floor is "well above the peak of profit in any one cycle of history". U.S. Māori peaked at about 62%, while the current Māori rate is 84.9% - This means that even if the floor clause were to be triggered, the level of profitability of beauty would be far above the best in history。

BUT SCA IS NOT A "PRICE-FOR-ALL" CONTRACT. SOME OF THE EXISTING PRODUCTS HAVE PRICE CEILINGS, WITH CEILING ANCHORS AT MARKET PRICES IN THE SECOND QUARTER OF 2026. IN OTHER WORDS, IT USES PART OF ITS FUTURE PRICE ELASTICITY IN EXCHANGE FOR A HIGHER INCOME CERTAINTY AND A LOWER MĀORI RATE。

Analyst Joseph Moore responded that "the contract price ceiling is the same as the price in the second quarter" did raise some concerns about "the company is locking the ceiling", but pointed out that the Māori rate was close to 90 per cent and was expected to remain in the zone for some time — it was reasonable for the counterparty to seek some protection in the negotiations, and the duration of the contract was the core dimension of assessing its value。

$100 billion income line, only a “minimum value”

Of the 16 agreements, 14 have specified price terms。

ACCORDING TO BARCLAYS AND MORGAN CHASE, THE MINIMUM COMMITMENT INCOME FOR THESE 14 AGREEMENTS (RPO, WHICH IS THE REMAINING PERFORMANCE OBLIGATION AT THE MINIMUM LEVEL AND PRICE) IS APPROXIMATELY $100 BILLION。

Management made it clear that actual income was expected to be much higher than the bottom LineBecause 100 billion is a minimum price, and if the market price is above the floor, the income rises。

For new items, the agreement also retains additional pricing upspace。

There's still an increase in production behind the Association, and capital expenditures are not gone

Locking demand does not amount to automatic delivery。

U.S. LIGHT RAISED THE NET CAPITAL EXPENDITURE GUIDANCE OF SY26 TO ABOUT $27 BILLION, BEFORE IT WAS ABOUT $25 BILLION. FY27 QUARTERLY CAPITAL EXPENDITURE IS EXPECTED TO BE HIGHER THAN FQ4, WITH MORE THAN HALF OF THE YEAR-ON-YEAR INCREASE COMING FROM CAPITAL EXPENDITURE IN THE CONSTRUCTION CATEGORY TO PRE-POSITION CLEANER ROOM CAPACITY。

THIS SUGGESTS THAT SCA DOES NOT PROVIDE A LIGHT ASSET MODEL, BUT RATHER A MORE DEFINITIVE RATIONALE FOR THE EXPANSION。

Clients are willing to bet money and Mi-gwang is willing to invest it. The Association makes this expansion more sound, but if future demand or price deviations occur, the delivery of capacity will remain a periodic variable。

The market is re-evaluating “how long can peak profits last” behind the consistent upward adjustment of target prices by the three institutions

All three agencies have raised their target prices, but the logical focus is not just on the May quarterly financial expectations。

Barclay(Researcher Tom O'Malley): The target price was increased from $1175 to $2,000, based on 12 times the annual CY27 earnings of 166.74 per share. The report states that the details of SCA are "better than expected" and that these agreements "have a substantial positive impact on protecting downside risks", while the supply-demand imbalance will not recede in the short term and there is room for upward mobility。

Morgan Stanley(Researcher Joseph Moore): The target price was increased from $1050 to $1,200, based on 30 times the cyclical profitability ($40 per share). An increase in the estimated profit-for-cycle capacity from $35 to $40 was reported on the grounds that the profit-for-work rate was close to $200/unit。

Morgan Chase(Researcher Harlan Sur): The target price has been substantially increased from $550 (December 2026) to $140 (December 2027), based on 10 times (10-year median market gain) SY28 per share of $154. The report characterizes the SCA expansion as a "step-by-step change" that fundamentally changes the commercial model properties of light。

Behind these model changes, the key variable is continuity of profits。

IN MAY, REVENUES AMOUNTED TO $41,456 MILLION FOR THE SEASON, AN INCREASE OF 73.7 PER CENT FOR THE RING; IN AUGUST, THE MEDIAN VALUE FOR THE SEASON WAS $50 BILLION AND FOR NON-GAAP EPS, $31. SINGLE-SEASON NUMBERS ARE ALREADY HIGH, BUT SCA OFFERS ANOTHER PROBLEM FOR THE MARKET: IF PRICES DO NOT CONTINUE TO RISE RAPIDLY, WILL IT BE POSSIBLE TO MAINTAIN HIGH RATES OF MAORI AND FREE CASH FLOWS

THE ANSWER GIVEN IN THE CURRENT FRAMEWORK IS THAT SOME INCOME IS MORE PROTECTED, BUT NOT ALL. PRICE CEILINGS, FUTURE EXPANSION, AND THE SUSTAINABILITY OF AI DEMAND REMAIN BORDER CONDITIONS。

Security and cash flow open up the idea of a return on capital, but the timing is limited

THE SCA ALSO BROUGHT ABOUT A CHANGE IN BALANCE SHEET: THE DEPOSIT WOULD GO INTO THE LIGHT AND, ALTHOUGH ULTIMATELY RETURNED TO THE CLIENT, THE CASH WOULD INCREASE IN THE SHORT TERM。

As of the May season, US$ 26 billion in cash and investments were available; US$ 25.4 billion in cash flows and US$ 18.3 billion in adjusted cash flows were operated during the season. A customer cash deposit of approximately $10 billion is also expected during the August season。

The path to capital returns is also beginning to be clear. The restrictions associated with the United States Chips and Science Act Act have limited the short-term buy-back space for U.S. lights; after 9 December 2026, as the restricted window passed, the corporate calibre pointed to the gradual return of 100 per cent of the excess cash to shareholders, which would be the main method。

THIS IS NOT THE DIRECT INCOME CONTRIBUTION OF SCA, BUT THE OTHER SIDE OF SCA’S SHIFT TO MARKET NARRATIVES: IF PROFITS ARE HIGH AND CASH IS ACCUMULATED QUICKLY, BEAUTY IS NO LONGER JUST “CYCLE MONEY” AND MAY ENTER A MORE STABLE FRAMEWORK FOR CASH RETURNS。

The financials themselves: the Māori rate is at an all-time high, and next quarter's guidelines are higher than expected

BEYOND THE SCA, U.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.A.S.S.S.S.S.A.S.S.A.S.S.A.S.A.S.A.S.S.A.S.A.S.A.S.A.S.S.A.S.A.S.S.A.A.S.A

• Receipts of $41,456 million, ring growth 73.7 per cent, significantly exceeding market expectations of $35.6 billion
• DRAM RECEIVES $31.3 BILLION (RING + 67 PER CENT) AND NAND RECEIVES $9.9 BILLION (RING + 99 PER CENT)
• DRAM AVERAGE RING INCREASE ABOUT 60%, NAND AVERAGE RING INCREASE ABOUT 80%
• Māori ratio 84.9 per cent, a record high of 81.8 per cent-81.9 per cent above market expectations
• Income per share of $25.11-25.12, significantly exceeding market expectations by approximately $20.49

AUGUST QUARTERLY (FY4Q26) GUIDANCE:

• Receipt guidelines $50 billion (median), higher than market expectations of approximately $431-43.6 billion
• The Māori rate is approximately 86 per cent and continues to exceed market expectations
• Proceeds per share direction 31.00 (median), higher than market expectations of about $25.31-25.72