Smaller companies often ride the coattails of their larger sector neighbors. When the big boys make waves, it's easy to catch a ride. This is true in many industries, but the highly interconnected semiconductor market runs this play especially often.
On a generally sleepy market day in which the Dow Jones Industrial Average (DJINDICES:^DJI) has barely moved more than 0.4% in either direction, Intel jumped 1.8% higher by 2 p.m. EDT. That's more than double the single-day move of the second-biggest Dow gainer. And the chipmaker can thank Micron for much of this sudden strength.
The connection is actually pretty complicated. For one, Micron reported analyst-stumping results for the third quarter yesterday. Micron shares jumped as much as 5.4% higher today on these strong results, and the report also sprinkled positive mojo over Intel. Among other drivers of Micron's great quarter, President Mark Adams noted that the PC market is doing better than expected.
"The PC market appears to be more favorable compared to prior industry forecast, and supply remains constrained," Adams said in the company's earnings call. "Pent-up demand for corporate refresh on desktop and notebooks seems to be leading to better-than-expected sector performance. PC DRAM pricing is improving both at major OEMs and in the channel as current forecast remains strong for Q4 and through the holiday season."
That's great news for Intel investors. The PC client division accounted for 63% of Intel's 2013 revenue, after all. That was down from 65% in 2012 and 66% in 2011. Anything that can slow down or reverse this troubling trend is welcome, including market analysis by a fellow PC systems parts supplier. And it's particularly nice to hear that the holiday season is shaping up to deliver decent PC sales.
But that's not all.
In other news, Micron announced a fresh collaboration with Intel. Micron is lending its memory expertise to boost Intel's next-generation Xeon processors, code-named Knights Landing.
Micron's 3-D memory architecture will be embedded in Knights Bridge chips, which are aimed at the high-performance server market. Comparing this on-package solution with external DDR4 memory solutions, Micron promises five times the sustained data bandwidth at one-third the power use and half the physical footprint.
This tidbit is less obviously good news for Intel than the juicy PC market analysis, but I'm sure investors are lapping this news up anyhow. Micron gains a large revenue stream from this collaboration; Intel gets high-performance products with lower manufacturing costs.
Given this tag-team effort by Intel and Micron, it should come as no surprise that server-chip rivals Advanced Micro Devices (NASDAQ:AMD) and ARM Holdings (NASDAQ:ARMH) are both trading down today. Intel and Micron are raising the bar for AMD and ARM, making it harder to beat Intel in head-to-head system design comparisons. For PC supplier AMD in particular, this weight is heavier than the PC market lift.
So Intel is riding Micron higher today, with no big news of its own. Considering that Intel sports a market cap more than four times larger than Micron, that's no mean feat. And it's a good day to own both of these muscular semiconductor stocks, as Intel was setting a 10-year high as I write this and Micron was at a new record high.
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