Micron stock rises after Samsung points to a chip production cut

Yahoo Finance Live anchors Julie Hyman and Brad Smith break down the rise in stock for Micron Technology.

Video Transcript

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JULIE HYMAN: Less than five minutes to the bell. So let's check in on some movers. We're looking at Micron shares. Now, they're rising after Samsung said it plans to make a meaningful cut to chip production amid the sharp global downturn in semiconductor demand.

Why is this positive for Micron? Well, there aren't too many memory chip makers anymore, right? There's Micron, there's Samsung, there's SK Hynix of Korea.

And we recently heard from Micron that it was still having some issues, right? Memory, more than any other kind of chip, is kind of a commodity. So if you have one of the biggest three producers saying it is meaningfully cutting production, then that, in theory, is good news for the rest of the chip makers as well.

BRAD SMITH: Yeah, factored into Samsung's guidance, their earnings guidance, for the first quarter of 2023, they did offer an update. They're expecting consolidated sales of approximately 63 trillion Korean won. And then you're taking a look at what that equates to in a percentage basis, down by about 19% versus Q1 of last year. And then operating profit 6-- well, 0.6 trillion Korean won as well.

So those are some of the updated figures. But, again, that comes on the capacity changes that would go in tandem with that as well. And an accounting for that is what really is coming forth in these numbers here.

But within the market more broadly, it's at a time where all of them are trying to either ramp up production, especially here in the US and some of the different efforts that we've seen come forward to bring more infrastructure online, to bring more capacity and production online. At a time where you do see a cut like this from Samsung's side, this has still been one of the most exciting sectors to watch early in the year, but for two different capacity reasons, well, for two different reasons, one on capacity and another on what the actual intellectual property and then additionally the geopolitical front, how that will continue to play out among all of these manufacturers, at least in the near term, as more of this capacity is being brought online, too.

JULIE HYMAN: Yeah, definitely. I mean, if you look at the Semiconductor Index, the Philadelphia Semiconductor Conductor Index, or the SOXX, it's up about 21% year-to-date. And it has been the programmable, more advanced semi makers that have been doing better in this environment than, say, the memory chip makers. But, nonetheless, this is a positive development for them.

There's some analysts' commentary around the Samsung decision this morning. Citi saying that it's a huge positive for the industry. KeyBank is saying also it's positive for Micron specifically because it will allow the supply/demand balance to come back to the market more quickly. So all of that seeming to be good for chips this morning, those kinds of chips in particular.

BRAD SMITH: Yeah, you got your White Sox, you got your Red Sox, you got your chip SOXX out there. And so, of course, the chip stocks the most favorable for investors to keep track of, at least here on the day and early in 2023, given the action that we had seen in Q1 of 2023. We'll see if some of that persists here now that we're in Q2.