It’s been the big question on the minds of tech investors in the past few weeks: have Micron (NASDAQ:MU | MU Price Prediction) and the broad basket of semiconductor stocks finally peaked out? And is this the moment that investors are betting against the DRAM stocks — which includes Dr. Michael Burry of The Big Short fame himself, who said he was short Micron last week — finally profit from the rollover? Of course, there have been a few moments like this in the past year, when Micron and the broader basket of memory chip stocks slipped by double-digit percentage points in just a few sessions.
Buyers of those past dips were rewarded quite quickly as Micron and the broad basket went on to continue where they left off before a quick correction. Given the V-shaped bounces we’ve seen from such dips, it’s like there was no correction at all for those investors who didn’t check into their positions daily or weekly. In any case, the mood certainly seems just a bit more unsettled this time around, with shares of Micron now in a bear market, off about 22% from all-time highs hit in June.
The semis have been rocked, but they’re not out yet
Meanwhile, some of the Magnificent Seven and the rest of the tech trade have held relatively steady.
Indeed, whether there’s a rotation or the rise of a new leadership group within AI and tech remains the big question. In my humble opinion, the latest dip might prove to be another big bump on the road higher for the memory makers. When it comes to the fundamentals, things are still very much firing on all cylinders.
It’s hard to procure more high-bandwidth memory (HBM). It’s sold out, and the line to secure more supply is quite long, to say the least. Nothing has changed about that. With SK Hynix poised to make a big splash with an IPO on the Nasdaq, there’s also potential for the DRAM makers to reheat again in record time. That’s the risk for the bears looking to go short after the latest move.
As it turns out, it’s not so easy to bet against one of the fiercest momentum trades in the market. As the next generation of GPUs (and what will follow that) go on sale, there’s a serious risk that HBM could remain in short supply through 2028 and even going into 2029 in spite of expansion efforts made by the Big Three memory makers.
The hardware deficit isn’t getting any better
Like it or not, the hardware deficit is in a terrible state, and it could get so much worse before it gets any better, as I noted in a prior piece. Sure, memory chips are commodities, but in this AI revolution, the narrative may have fundamentally changed. When you consider Jevons Paradox (cheaper AI compute leading to more usage), HPM demand might just act as a flywheel that keeps on spinning ever faster.
When it comes to the Wall Street pros, they seem little moved by the latest slide in Micron. Sell-side analysts have been aggressively raising the bar on their price targets, and until we see some of them lower the bar after a nasty slide, the consensus seems to be that the dip is buyable, and they might be far off.
At this juncture, the Street-high price target, belonging to Melius Research, sits at a lofty $2,200 per share — that’s a gain of around 133% from here. The bull points are the monopolistic environment in the U.S. (that comes with pricing power) and incredible fundamentals (that might not normalize all too quickly).
The bottom line
In short, Micron’s in the perfect zone right now, and it’s becoming really hard to time any sort of top, given all data suggests more of the same will probably be up ahead. Apart from Dr. Burry, you’re not going to find many bears in the sell-side analyst camp.
Unless you’re willing to go against the grain and run the risk of getting squeezed, I think it’s best not to follow the shorts into a name that will probably only fold if a hyperscaler scales back — something that’s still unthinkable given it feels like being at a poker table where everybody just raises or calls, given how massive the pot has become and how towering their chip stacks are still.
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