Micron Stock's Drop Triggers 'Buy the Dip' Calls. No One's Listening

Dow Jones
Yesterday

Micron Technology stock is well off its highs. That's an opportunity to buy into the memory-chip company before the next round of price increases, according to Wall Street analysts.

The shares were down 3.5% at $899.15 in early trading. Although the price has more than tripled this year so far, it has slumped from its summer peak of more than $1,200.

The recent causes have been fears of memory-chip competition from China's CXMT and doubts about the sustainability of the artificial-intelligence boom in general.

But the CXMT-driven fall this week is just giving investors "another reason to buy the memory dip," according to Kent Fung, vice president for market intelligence at Fundstrat. He noted that CXMT's so-called 4F square design could challenge conventional server dynamic random access memory (DRAM), but it is not competition for the high-bandwidth memory (HBM) demanded for AI servers.

"Investors should consider the possibility that the knee-jerk response to CXMT's announcement has been a bit of an overreaction," Fung wrote in a research note Thursday.

"While CXMT's DRAM breakthrough is impressive, it has a weaker association with AI and thus, arguably weaker implications for memory and storage stocks, particularly with regard to their growth potential," he added.

Fung is not alone in his optimism. KeyBanc analyst John Vinh reiterated a $1,750 target price on Micron and called it one of his favorite ideas following a trip to check supply chains in Asia. His findings included that pricing for DRAM in the fourth quarter is expected to rise by 15%-20% from the previous quarter and Google is looking at extending long-term memory-supply agreements through to 2035.

"While we do not believe that the current memory upcycle will extend to 2031 or 2035, this would suggest customers are concerned that the memory shortages are going to persist for an extended period of time and at least beyond 2028," Vinh wrote in a Thursday research note.

 

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