Key Takeaways
- Micron shares jumped 5% today after TSMC said it remains focused on logic chips, as Applied Materials and other chip stocks rebounded.
- TSMC staying out of memory removes Micron’s newest supply worry, though China’s CXMT is still pushing into server memory.
- Micron’s forward P/E sits near its 2017 and 2018 cycle-peak levels, a sign the market expects record earnings to fade.
Micron Technology (MU) jumped 5% today after Taiwan Semiconductor Manufacturing said it’s sticking with logic chips, playing down Friday’s report that it might start making memory. Chip stocks rebounded from last week’s AI selloff, with Applied Materials (AMAT) up 11%.
TSMC wants no part of memory, for now
On Friday, The Information reported that TSMC was exploring production of 3D DRAM at Nvidia’s request. The appeal is obvious: Micron’s gross margin hit 86.8% in its quarter to Sept. 3, about 20 points above TSMC’s 66.4% in its third quarter.
This morning, TSMC told Barron’s its mission is “to be the trusted technology and capacity provider of the global logic IC industry for years to come.”
Priced like the peak won’t last
Analysts expect Micron’s normalized EPS to more than double in fiscal 2027, peak in fiscal 2028 and edge down in fiscal 2029.
TSMC’s statement shouldn’t move those estimates much: Micron said on its fiscal fourth-quarter call that over 75% of its 2027 output is already committed.
Yet Micron traded at 3.9x forward earnings at Friday’s close, and about 4x after today’s jump. It last traded that cheaply in 2017 and 2018, as its previous cycle peaked, and its EPS then fell 79% from fiscal 2018 to fiscal 2020. So investors are betting memory prices fade well before Micron’s long-term deals run out in 2030.
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China and new fabs matter more
China’s CXMT is aiming at server memory, where Micron earns some of its widest margins. Consensus also has Micron’s own capex jumping to $54.5 billion in fiscal 2027, from $30.7 billion in fiscal 2026. Applied Materials’ fiscal fourth-quarter report after Thursday’s close is an early read on how much of that new capacity is coming.
The other half of last week’s scare was a slower data-center build after the Democrats’ midterm sweep. Astera Labs (ALAB) rose 12% and Arista Networks (ANET) rose 8%, while Lumentum (LITE) gained 11% alongside Marvell, which is buying it. Like Micron, all three need that build to keep going.
At about 4x forward earnings, Micron has room for upside if the shortage runs through 2028, as management expects. The next test is Micron’s fiscal first-quarter report in December, which management calls the floor for fiscal 2027’s gross margin.
So what is Micron stock actually worth?
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