Micron benefits from possible chip shortage

Shares of Micron Technology, as well as other companies in the semiconductor sector, registered a strong rise in New York in the session this Monday (15) amid a resurgence in momentum trading linked to artificial intelligence (AI), along with reminders of the shortage of memory chips.

Investors also debate Micron's intrinsic value. The chipmaker trades at a remarkably low projected price/earnings multiple, a reflection of the memory industry's frequent "boom and bust" cycles. However, the prospect of a so-called "supercycle" in memory chips - driven by the need for these components in AI hardware - is causing investors to reconsider Micron's valuation.

Barron's argues that Micron is undervalued given the potential for long-term earnings growth.

The most recent sign of the memory supply squeeze came last week, when the new head of Microsoft's Xbox video game console division warned that the unit was facing a "crisis of hardware components," according to a publicly released memo. Xbox CEO Asha Sharma said memory costs have risen roughly fivefold in the past two years and the company can't make as many consoles as consumers want.

In addition to Micron Technology, Western Digital has also stood out in the sector: Morgan Stanley raised the price target for the shares from US$488 to US$650, maintaining the purchase recommendation. Also, chip component maker Austria Technologie & Systemtechnik AG posted the biggest gain in six years after the company raised forecasts and promised increased production and investment as part of a deal to supply components to Advanced Micro Devices, according to Bloomberg.

*With information from Dow Jones Newswires

Source: CNN