Citi says this chip stock is still its top AI pick, will overcome Taiwan earthquake disruption
In the face of operational disruptions caused by a significant earthquake in Taiwan, Citigroup is maintaining its optimistic outlook on Micron Technology, a leading memory chip manufacturer. The Boise, Idaho-based company confirmed that all of its employees are safe and is currently assessing the earthquake’s effects on its operations and supply chain.
Citi analyst Christopher Danely suggests that the event may present an unexpected benefit for Micron. He notes, “Micron has roughly 60% of its Dynamic random access memory (DRAM) manufacturing based in Taiwan, and the earthquake might lead to some inventory loss, which could positively affect pricing.” Danely continues to support the stock as a top selection, setting a price target of $150.
The semiconductor industry is closely monitoring the situation after a 7.4 magnitude earthquake, the most powerful to hit Taiwan in 25 years, shook the region recently. Taiwan’s robust chip industry, which includes the key global chip supplier Taiwan Semiconductor Manufacturing, plays a crucial role for many U.S. companies.
Looking into the future, Danely is optimistic about the revenue growth driven by the demand for DRAM and high-bandwidth memory (HBM), particularly from companies such as Nvidia. He anticipates this could result in a $3 billion revenue increase by 2025. Despite concerns over a potential downturn in the DRAM market due to overcapacity predicted for 2025, Danely expects capital expenditures in the DRAM sector to rise significantly in 2024 and 2025. He believes that these concerns will be mitigated by the loss of capacity due to HBM and an uptick in demand.
With a price target that implies a 21% increase from the stock’s closing price on Thursday, Danely’s projection comes after the stock’s impressive rally, with shares climbing more than 45% since the beginning of the year. This growth highlights the integral role Micron and the wider semiconductor sector play in the advancing technological landscape, underscored by the increasing importance of artificial intelligence and the subsequent demand for more sophisticated memory solutions.
The resilience of Micron Technology amidst these challenging circumstances showcases the company’s vital position within the global tech supply chain, as well as the broader semiconductor industry’s capacity to navigate through natural disasters and maintain its crucial contributions to technological progress.
