Shares of Micron Technology (MU 2.67%) were up 4.5% on Tuesday even as the Nasdaq Composite was down 1.1% at the same time and the iShares Semiconductor ETF (SOXX -0.10%) was down an even steeper 2.8%.
Investors seem to be buying Micron and selling other semiconductor stocks as they try to sort out the winners and losers in last Friday's new rules from the administration, which aims to clamp down on sales of advanced semiconductors and semiconductor equipment to China.
Although there were some restrictions on chip and equipment sales to China before, last Friday's new rules brought with them the most sweeping restrictions yet. Now, every semiconductor equipment sale to foundries within China will be restricted, with a presumption of denial unless a special license is given by the administration.
Most notably for Micron, the new restrictions don't just harm equipment sales for advanced logic and artificial intelligence chips, as we saw with the August restrictions on Nvidia (NVDA -0.49%), but they now extend to Chinese advanced memory companies. The most notable of the upstart China memory names is Yangtze Memory Technologies Co. (YMTC), which is currently producing advanced NAND flash.
Not only that, but even sales of equipment to non-Chinese companies with fabs (microchip fabrication plants) in China, including South Korean memory company and Micron competitor SK Hynix, will have equipment sales restricted until a license can be obtained.
I would bet that sales of equipment to non-Chinese fabs within China will probably get a license eventually, but since Micron doesn't have any leading-edge memory fabs in China, it stands to benefit as competitors are potentially cut off from leading-edge equipment.
Notably, it has been rumored that Apple (AAPL 0.81%) recently sought to procure advanced memory chips from YMTC, most likely for iPhone and/or Mac sales in China; however, that move came under criticism from American legislators earlier this summer.
It's unclear exactly how much of its competition is shut out from cutting-edge, American-made semi-cap equipment, but Micron investors will be glad to take today's win. It has been a rough year for Micron investors, as a series of dismal recent earnings reports have sent the stock down 42% on the year.
On the bright side, that's actually a bit better than some other high-profile names in the semiconductor space. With this summer's passage of the CHIPS Act, and with Micron being the only U.S. producer of dynamic random-access memory (DRAM) chips and one of two U.S. producers of NAND flash, these new rules of the road could benefit Micron -- potentially a lot -- going forward.
We are in a pretty nasty memory downturn right now as evidenced by the massive drop in revenue and earnings Micron forecast on its Sept. 29 earnings release; however, once the next upcycle starts, Micron will likely be in a stronger competitive position.