Chip Stock: According to Citi Research, when faced with a downturn in the semiconductor industry following this year’s remarkable surge driven by artificial intelligence, investing in Micron stock is the optimal strategy for survival.
Micron Technology (MU), a frontrunner in the dynamic random-access memory and flash memory sectors, plays a key role in the market for desktop computers, servers, smartphones, and solid-state hard drives.
In a recent report, analyst Christopher Danely restated his Buy rating for Micron stock, setting a price target of $75.
Danely expressed his concerns about an imminent pullback in the semiconductor sector, attributing it to the excessive hype surrounding AI. He stated, “We are reiterating our cautious stance on the group, given the AI-driven melt-up. Consequently, we have revised our rankings, promoting Micron to our top pick.”
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At the start of Monday’s trading session, Micron stock experienced a 1.7% decline, settling at $67.99. Year to date, the stock has demonstrated a solid growth of 36%, slightly trailing the 37% gain observed in the iShares Semiconductor exchange-traded fund (SOXX), which tracks the ICE Semiconductor Index.
Danely warns that as the global economic environment remains challenging, spending on AI semiconductors may cannibalize investments in other chip categories, such as PC processors.
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Micron has also become entangled in the escalating geopolitical tensions between the United States and China. The Cyberspace Administration of China (CAC) recently imposed a ban on certain Micron products following a two-month investigation, citing potential network security concerns that could jeopardize China’s national security.
Given China’s actions, the analyst predicts that the U.S. government may now be more inclined to allocate funds from the CHIPS Act to Micron. In 2022, President Joe Biden signed the CHIPS and Science Act, which encompassed approximately $50 billion in funding to bolster chip manufacturing in the United States.
“We believe that the Chinese ban on Micron positions the company to receive greater support from the CHIPS Act,” Danely concluded.