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Why chip stocks are dragging down the Nasdaq today
investingLive • • business
Key Points:
- The market is signaling a peak in computer chip prices, especially in memory chips, with companies like Micron seeing forward earnings multiples drop to around 7x, reflecting skepticism about sustained high margins.
- Micron shares have fallen 27% since their post-earnings peak, despite the company forecasting strong quarterly earnings, as investors anticipate memory prices reverting to historically low margins.
- Recent significant drops in stock prices have been concentrated in memory and chip manufacturers, including WDC, SNDK, INTC, and AMD, while broader indices like the S&P 500 and Nasdaq 100 remain relatively stable.
- Morgan Stanley highlights that while the memory sector is cyclical and near peak pricing and earnings revisions, the long-term outlook remains bullish due to AI-driven demand, though near-term volatility and share price weakness are expected.
- Market focus is shifting to upcoming earnings reports from hyperscalers, whose AI spending and guidance will be critical in determining the memory market's near-term trajectory.
