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What Made Memory Stocks the Top Gains of the S&P 500 Index?

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Micron’s stock jumps over 8%

Micron Technology (MU) and Western Digital (WDC) stocks were among the top five gainers of the S&P 500 Index on March 21 in the first half of the trading session as Micron reported better-than-expected fiscal 2019 second-quarter earnings.

Memory chipmakers Micron’s and WDC’s stock rose above 8% and 6% in the first half of March 21 even though Micron reported weaker-than-expected guidance for the third quarter of fiscal 2019. Semiconductor manufacturing equipment suppliers Applied Materials’ (AMAT) and Lam Research’s (LRCX) stocks rose above 4% even though Micron cut its capital spending. This strong stock momentum saw the VanEck Vectors Semiconductor ETF (SMH) rise 2.8%.

Even though the memory market has been in a downturn and analysts have been downgrading memory stocks, Micron’s and WDC’s stock rallied over 30% year-to-date over the anticipation that demand will revive in the second half.

What Micron’s fiscal 2019 second-quarter earnings say about the memory market

On the fiscal 2019 second-quarter earnings call, Micron CEO Sanjay Mehrotra said, “Since our last earnings call, DRAM pricing weakened more than expected.” He said the company reduced its outlook for DRAM (dynamic random access memory) industry demand growth from 20% to low-to-mid-teens for calendar 2019 due to higher levels of customer inventory, weak server demand, a worse-than-expected CPU shortage at Intel (INTC), and macroeconomic uncertainty. All these factors saw Micron report weaker-than-expected guidance for the third quarter of fiscal 2019.

Micron’s and WDC’s stocks rose as Mehrotra stated that DRAM bit shipments will start growing sequentially in the third quarter of fiscal 2019, driven by demand from the data center market. He believes excess customer inventory will be absorbed in the first half of calendar 2019 and new product launches will see demand pick up in the second half. However, he expects robust DRAM demand in fiscal 2020.

Next in this series, we’ll look at Micron’s fiscal 2019 second-quarter earnings.

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