Is Micron (MU -3.69%) stock just a momentum stock now?
It kind of feels like it. After falling more than 25% over the past four trading days, shares of the semiconductor memory stock took off like a rocket this morning, surging 9.6% through 9:40 a.m. ET.
The reason for this, says HSBC, is competing "narratives" about what's going on in artificial intelligence.
Image source: Getty Images.
Everybody's got an opinion
According to one theory, explains analyst Alastair Pinder, high profit margins at Micron and similar memory stocks have attracted the attention of China, which plans to flood the market with cheap, mass-produced memory chips, undercut Micron's pricing, and steal Micron's market share.
The recent IPO of Chinese DRAM manufacturer CXMT, raising $8.5 billion in cash for production expansion, supports this theory.
Roughly 20% of recent market volatility is explained by this theory, according to Pinder. A second theory, accounting for about 26% of volatility, is called "AI positioning capitulation." Here, investors frustrated by the constant spikes and slumps in semiconductor stocks are simply exiting the sector to invest in more defensive stocks such as pharmaceuticals. Combined, these two prevalent theories help explain much of the selling in semiconductors we've seen over the past few days.
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Key Data Points
Today's most popular opinion
But now here's the theory that has investors excited about semiconductors, and memory stocks especially, this morning:
37% of market volatility, says Pinder, comes from the theory that AI hyperscalers -- giant tech companies such as Google, OpenAI and Anthropic --are overspending on AI capacity. These companies will have a tough time when they finally realize they can't generate enough revenue to justify their investments. In the meantime, though, Micron will make out like a bandit selling them overpriced memory chips!
That's bad news for them. It's great news for Micron, though.
