Is MU Stock Set to Skyrocket?
Although shares of Micron Technology, Inc. (NASDAQ:MU) have tumbled in recent months, the maker of microprocessors is due for a comeback. MU stock is trading at a steep discount to its true value.
To begin with, the decline in semiconductor stocks sprang from concerns about China and Greece. Remember when Greece defaulted on its debt this past summer? Remember the weeks of negotiation before the default that had markets on edge?
Then there was the epic meltdown of the Chinese stock market. Investors around the globe watched in horror as the Shanghai Composite Index plunged by 30% in a single month. Both those events placed a strain on Micron and its peers.
But as the fog of 2015 lifts, semiconductor stocks will resume their previous status. Demand for certain types of microprocessor chips are going to shoot through the roof, as the “Internet of Things” (IoT) becomes reality.
Chart courtesy of www.StockCharts.com
The latest chip from Micron is reportedly leaps and bounds ahead of today’s technology, making the company’s product offering perfect for the IoT. MU stock has a huge edge that could send it soaring 142%. (Source: “Intel’s new storage chip is 1,000 times faster than flash memory,” The Verge, July 28, 2015.)
Micron is one of the few firms in the industry that actually spent the last year innovating, rather than looking for another company to buddy up with. High-profile mergers and acquisitions have become all the rage lately, but Micron moved against the crowd, opting for a partnership instead.
In partnership with Intel Corporation, Micron developed a new chip that could make computing 1,000 times faster. The technology is a fundamental departure from how microprocessors have worked in the past. Instead of transistors, the chips layer information in a denser form.
Fitting more transistors onto smaller chips was how technology grew so much faster in recent decades. Smartphones are faster than they were five years ago, simply because more transistors were added to chips. But the rate of growth was slowing down.
Each new transistor was adding less speed than it used to, so the entire industry was under pressure to invent a new kind of microprocessor that would take computing speeds to the next level. It appears that Micron and Intel have finally achieved that goal.
Innovative Breakthrough Can Push Micron Higher
The new chips can process a flood of data simultaneously, making them a perfect fit for the IoT movement. The IoT is a broad term that refers to adding Internet connectivity to regular household devices. The big idea is for the company’s new chips to collect and dissect information about the device’s efficiency, then figure out a way of making it better. The IoT aims to learn about consumer preferences and improve goods and services based on the data.
How well the device learns depends on the quality of its artificial intelligence software. But processing that amount of information demands better hardware than currently exists, especially as the IoT grows in size. The Internet’s infrastructure needs a great leap forward.
Micron looks like it will make that leap and that’s why it’s set to dominate the semiconductor space. Since MU stock has previously hit a peak of $36.49, I expect the stock price could possibly rebound as high as $40.00, once investors digest the argument I laid out above.
Think about it: the downward swing in Micron stock was driven by abstract pessimism. It would be perfectly normal for the stock to rebalance, but the new chip should give MU stock an added bump.
It may not happen in a few days; confidence has to seep back into the semiconductor industry and Micron’s chips need to hit the market (they’re in production at present). However, once the logic takes root, money will pour back into Micron’s stock.