MU Stock: Here’s Why Billionaire D.E. Shaw Is Bullish on Micron Technology

mu stockThe Smart Money Is Buying MU Stock

Micron Technology, Inc. (NASDAQ:MU), the U.S.-based microchip manufacturer that is trading around $14.50, is less than half the value it was a year ago. Is it time to bail on MU stock? Definitely not, especially given that one of the world’s smartest investors D.E. Shaw is buying up MU shares hand over fist.

Billionaire D.E. Shaw has increased his stake in Micron Technology by 38% in the last quarter. (Source: “D. E. Shaw & Co. Inc 13-F Filing,” Securities and Exchange Commission, December 11, 2015). One of the reasons explaining D.E. Shaw’s optimism over MU stock is that Micron Technology is developing a new type of computer memory with Intel Corporation (NASDAQ:INTC), which is said to be more efficient than are its predecessors.

D.E. Shaw Increases Stake in Micron Technology Stock

The technology is the first new type of memory since the launch of NAND flash memory, which led to the development of the smartphone with the potential of being up to a thousand times faster. Micron says the new technology will allow for much faster access to data.

Intel and Micron have already started production in their joint plant in Lehi, Utah. The sampling circuit 128 Gbits is planned for this year and the technology itself is based on a three-dimensional structure with no transistor memory cells. In early December, at the International Electron Devices Meeting (IEDM), the world’s pre-eminent semiconductor conference, Micron and Intel discussed their 3D-NAND flash technology, now sampling to customers. (Source: “Intel/Micron Detail Their 3D-NAND at IEDM,” Solid State Technology, December 10, 2015.)

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Micron has completed the final 67% acquisition of the Taiwanese memory-chip technology firm Inotera for $3.2 billion. Inotera was founded in 2003 as a joint venture between Nanya Technology and Infineon Technologies. Micron, which had taken over the latter’s shares in 2008, effectively became the sole customer for the Taiwanese company’s production. (Source: “Micron Technology to Buy All of Taiwanese Chip Company Inotera,” The Wall Street Journal, December 14, 2015.)

MU stock could also see gains thanks to Huawei, one of the world’s fastest-growing cell phone manufacturers. Huawei wants to improve its devices, starting with the hardware. The Chinese company already produces its own processors, but it wants to become autonomous in GPU and memory for smartphones and tablets. Nevertheless, a wise company, bent on fast expansion, cannot simply start from scratch and Micron Technology is ideally suited to contribute to the design and implementation of storage hardware. Plus, the company already possesses economies of scale in this area.

Micron Technology, based in Boise, Idaho, produces various types of semiconductor devices, including DRAM, NAND Flash and NOR, and solid-state storage (SSD) units. Micron also manufactures storage devices for consumers, marketed under the Lexar and Crucial brands.

Together, Micron and Intel have formed a joint venture, IM Flash Technologies, which manufactures the NAND flash memory.

Thomson Reuters named Micron among the 100 most innovative companies in the world in 2012 and 2013. (Source: Top 100 Global Innovators, Thomson Reuters, Last Accessed Dec 22, 2015.) Micron Technology is one of the world’s top three semiconductor companies, falling behind Samsung and SY Hynix.

Meanwhile, China has become ever more ambitious in creating its own memory and data storage industry. There, Micron Technology remains a major target for acquisition, despite the likely hostility of U.S. authorities.

Chinese companies will also look for other ways to benefit from Micron’s experience and market reach. The technology has attracted attention from China’s Tsinghua Unigroup, because China, the largest semiconductor consumer, accounts for almost half of computer chip demand for domestic and export markets, even if it has to import 90% integrated circuits.

The Bottom Line on MU Stock

Zhao Weiguo, president of Tsinghua Unigroup, has already met with Micron’s board members to gauge the feasibility of an acquisition with U.S. authorities. Should it be rejected on national security grounds, as noted by Senator John McCain, Tsinghua could still ally with Micron to enable it to develop its sales in China, while negotiating a production on Chinese soil of flash memory drives and other devices. (Source: “Tsinghua’s Latest Deal Adds Chairman of Micron Venture,” Bloomberg, October 12, 2015.)

All the more reason to be bullish on MU stock.

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