What happened

Shares of memory and storage producer Micron Technology (MU 6.01%) rose today, up 5.8% as of 3:54 p.m. ET. The move higher was certainly a bit of a surprise, given that Micron guided to a severe decline in revenue and earnings per share for the current quarter as part of its earnings release last Thursday.

However, Micron had been down strongly in June, so this may be a bit of "sell the rumor, buy the news" on its stock today. Additionally, more COVID-19 lockdowns in China were reported over the weekend. Because of the specific cities where lockdowns are currently occurring, that could actually be a positive for Micron, as its largest rivals in DRAM memory and NAND flash have significant operations in the affected cities.

So what

While Micron beat earnings estimates last week, management also guided to a 17% revenue decline and 35% earnings-per-share decline for the current quarter. CEO Sanjay Mehrotra admitted demand had weakened considerably in just the past month, particularly in smartphones and PCs, and especially in China.

So, if Shanghai's March lockdowns were so disruptive to demand, why might news of more lockdowns be benefiting Micron today? Because new outbreaks were detected in both Wuxi and Xi'an. Micron rival SK Hynix has a large DRAM manufacturing plant in Wuxi, where government officials have put parts of the city into lockdown amid several dozen reported cases.

Similarly, authorities have ordered businesses, schools, and restaurants in the city of Xi'an to close for one week, amid another outbreak there. Micron's other main South Korean rival, Samsung, has nearly half of its NAND flash output coming from plants in Xi'an. Micron itself has some operations in China, too, but these are mostly assembly and test operations, not wafer production of the memory chips themselves. Micron also has redundant assembly and test capacity in Taiwan, Singapore, and Malaysia.

While it's not clear how much DRAM and NAND supply will be affected, if at all, the news of these closures likely helped Micron higher today, as the stock outpaced the semiconductor sector more broadly. Memory and storage chips are near commodities, whose prices are highly sensitive to supply and demand. If supply is disrupted, it's possible memory prices may not fall as much as feared. 

Also helping matters was the fact that Micron had become extraordinarily cheap over the past couple months, with its stock price falling close to the company's book value. That could have led to some traders to buy the stock or cover short bets following last week's negative earnings report.

Now what

It's difficult to know where Micron's stock is going in the near term, especially with so many crosscurrents hurting both supply and demand in China, as well as huge uncertainty over the path of interest rates and inflation.

One thing is certain, though: The demand for memory and storage is set to grow by leaps and bounds this decade, and Micron has become an industry leader in both the latest DRAM and NAND technologies. With it down about 40% from its all-time highs in January and with a low price-to-book value, longer-term value-oriented investors should definitely take a look at its shares today, even after Tuesday's nice bounce.