Micron Technology fell Friday with shareholders digesting the arrival of memory-chip peer SK Hynix on the U.S. market and a huge investment announcement from Micron itself.
Micron shares slip nearly 3.5% intraday as SK Hynix's American depositary receipts began trading in the U.S. at $170, up from their initial public offering price of $149.
Barron's has written positively about the ADRs, suggesting that they offer a cheaper way to play the memory-chip boom than Micron.
Some investors might choose to diversify their memory-chip investment between Micron and SK Hynix, which could pressure Micron's stock. Additionally, SK Hynix is raising $26.5 billion which could be invested in manufacturing capacity, creating fiercer competition in future.
However, there should be plenty of demand to go around. Big Tech companies are set to spend around $1.5 trillion on global cloud and AI infrastructure in 2027, and BofA analysts estimate memory will represent around 35%-40% of that spending.
Micron is sufficiently confident to have raised its U.S. investment commitment to $250 billion from $200 billion in a Thursday announcement. That includes a $100 billion project in New York state that was announced in 2022 and isn't expected to start production until 2030.
"The main players ( Samsung, SK Hynix, and Micron) have demonstrated discipline on capacity expansion for many years now. New greenfield capacity takes time to build. The current market outlook is still expecting demand higher than supply in 2027. Therefore, we have no concern on irrational capacity addition in general," said Hendi Susanto, portfolio manager of the Gabelli Global Technology Leaders ETF.
(END) Dow Jones Newswires
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