Analyst Claims Massive Rally in This Chip Stock ‘Will Sustain’

Memory chip manufacturer Micron Technology experienced a remarkable increase of nearly 15% in its stock value on Thursday, driven by a positive revenue forecast for the first quarter. This outlook highlighted strong demand and pricing for high-bandwidth memory chips (HBM) vital for the expanding generative AI industry.

As a significant supplier to Nvidia, a major player in the AI sector, Micron added approximately $15 billion to its market capitalization on this day alone. Over the past three weeks, the stock has surged about 27%.

In its fourth-quarter results ending on August 29, Micron reported the highest quarterly revenue growth it has seen in ten years, with forecasts vastly exceeding Wall Street’s predictions.

Following the report, an analyst from Mizuho suggested that it was not an ideal time for those betting against memory and semiconductor equipment stocks. The analyst advised those shorting these stocks to consider covering their positions and to explore opportunities in certain leading semiconductor companies, despite potential reluctance to chase the recent price increase.

The analyst also expressed confidence that Micron’s rally would continue, potentially attracting investors who previously had short positions to switch to long positions in the near term.

In addition, Samsung Electronics’ strategy concerning traditional DRAM capacity and growth remains a significant variable in the memory market until 2025. Like Micron, Samsung manufactures memory chips used in AI applications.

However, Mizuho pointed out two factors that may limit aggressive actions from Samsung in the traditional DRAM market. First, Micron is actively shifting its focus from lower-margin sectors, such as PCs and smartphones, towards higher-margin and high-value products like HBM servers and data center chips. Micron’s leadership is confident that its technology offers superior power and performance compared to competitors like SK Hynix and Samsung.

Second, the U.S. government is anticipated to add ChangXin Memory, China’s leading DRAM manufacturer, to its entity list, which would restrict their access to global semiconductor equipment imports. While this action may not completely eliminate China’s ability to produce conventional DRAM for PCs and smartphones, it would significantly reduce the risk of an oversupply flooding the market and driving down prices or taking market share, according to the analyst.