Today's trading session can be summarized by a single driving force: Micron Technology has reignited the AI trade.
On June 25th, the Shanghai Composite Index experienced narrow-range fluctuations throughout the day. Meanwhile, the ChiNext Index surged nearly 3%, and the STAR 50 Index jumped close to 4%, both setting new historical highs. By the market close, the Shanghai Composite was up 0.23%, the Shenzhen Component Index rose 1.82%, and the ChiNext Index climbed 2.84%.
Market breadth showed a stark divergence, with 1,231 stocks advancing and 92 hitting their daily limit-up, while a significant 4,228 stocks declined. Investors remarked on the extreme nature of the session, noting that despite major indices being in the green, over 4,000 companies saw their share prices fall.
The memory chip sector led the gains, with stocks like Beijing Juneng and Demingli surging to their limit-up prices. MLCC concept stocks also saw a collective surge, with companies such as Fenghua Advanced Material hitting the upper limit. According to a Digitimes report, high-capacitance, high-voltage MLCCs required for AI servers are in short supply, with prices for some specifications rising approximately 50% since the start of the year and delivery times significantly extended. Unlike the weak demand in consumer electronics, AI servers have extremely high power management requirements, leading to a far greater number and value of MLCCs needed per server compared to traditional equipment. As GPU power consumption continues to rise, demand for MLCCs is experiencing a structural boom across components from power supplies to motherboards and high-speed networking gear.
Financial stocks, including securities firms, continued their strong performance. Changjiang Securities secured its third limit-up in four trading days, while China Securities Co., Ltd. briefly touched its daily limit-up during the session. PCB concept stocks also saw a midday rally, with Zhongjing Electronics, Hongban Technology, and Ultrasonic Electronic among those hitting the upper limit.
On the downside, the precious metals sector retreated, with Zijin Mining Group and Chifeng Gold falling more than 5%.
The catalyst for today's explosive rally in AI and technology-related sectors was undoubtedly the strong quarterly report from Micron Technology, released in the early hours, which provided a powerful boost to the AI trade. Overnight, U.S. stocks saw a sharp late-session sell-off, but following Micron Technology's earnings, markets from Japan and South Korea to Nasdaq futures rallied sharply.
The memory chip manufacturer's results for the fiscal quarter ending in May comfortably surpassed analyst expectations, and its revenue and profit outlook also exceeded Wall Street forecasts. For the third fiscal quarter ended May 28th, Micron Technology reported revenue rising to $41.5 billion and earnings per share increasing to $25.11. Analysts had, on average, anticipated revenue of $35.7 billion and EPS of $20.49.
Another indicator of Micron Technology's improving profitability was its adjusted gross margin, which more than doubled year-over-year last quarter to 84.9%, beating the analyst consensus estimate of 81.9%. In a statement on Wednesday, the company projected revenue for its fourth fiscal quarter ending in August to reach approximately $50.0 billion, compared to the prior analyst average estimate of $43.2 billion. Excluding certain items, EPS is expected to be around $31.00, above the market expectation of $25.31.
Micron Technology also disclosed it has entered into 16 strategic customer agreements, with an average duration of three years. Analysts suggest this signals the company's potential to mitigate the severe boom-and-bust cycles that have long plagued the memory chip industry.
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