What’s Going On Here?Never tell US microchip maker Micron the odds: it announced a better-than-expected quarterly update late on Wednesday, and investors went all in on its stock, which rose 4% on Thursday. What Does This Mean?Micron’s rivals had previously suggested that a tough start to the year for chipmakers would end on a more positive note, thanks primarily to 5G rollouts and the release of major new smartphones. The US-China trade war, however, means things haven’t panned out quite as hoped.
Even so, Micron’s quarterly earnings were slightly higher than predicted, while a promising earnings forecast might’ve encouraged investors to double down on the company. The chipmaker reckons customer demand will continue to increase until at least this time next year – and that it’ll earn more in the current quarter than investors have estimated. Why Should I Care?For markets: Rolling the dice.
Micron’s stock has risen around 75% this year, and its positive outlook for next year may have convinced investors to buy up other chipmakers’ shares, too. The industry is globally connected: it takes over 200 suppliers from 43 countries, for example, to make an iPhone (tweet this). So if one chipmaker makes the right call, it’s likely several will cash in. And since chipmakers’ fortunes tend to mirror those of the global economy (given their products are used in everything from cell phones to cars), Micron’s forecast could suggest economic growth next year will also be better than investors expect.
The bigger picture: Counting cards.
Earlier this year, the US prohibited its companies from doing business with Chinese giant Huawei. But by November, at least some American companies were being granted exemptions from the ban – and this week, Micron revealed it was among them. Good news for Micron, but not such good news for Korean rival Samsung: it was probably rubbing its restriction-free hands together at the prospect of fulfilling Huawei’s unmet demand. | 