Why Micron Stock Bounced Back Today
Key Points
South Korea sparked a selloff yesterday when a government official floated the idea of taxing windfall AI profits.
But Micron doesn't manufacture AI memory chips in Korea.
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Easy go, easy come.
Micron (NASDAQ: MU) stock got rocked yesterday by worries South Korea may pass a law imposing a windfall profits tax on the money Micron earns selling high-bandwidth memory (HBM) computer chips for use in artificial intelligence. Shares of the computer memory-maker closed the day 3.6% lower -- but on Wednesday they're bouncing right back, up 3.2% through 9:50 a.m.
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Image source: Getty Images.
Why I'm not surprised
Color me unsurprised.
This kerfuffle started when Korean President Lee Jae Myung's chief of staff floated a Facebook post (hardly an official way to initiate legislation) musing that "excess profits in the AI era are [being] concentrated" in the hands of just a few companies, that this is unfair to Korean society, which helped spark the AI revolution -- and that a new tax might be a good way to fund paying a "national dividend" to spread the wealth around.
Whether that's how things play out in Korea remains to be seen, but as I pointed out yesterday, the risk to Micron stock seems low. Micron doesn't manufacture chips in Korea, for one thing, so it's not clear the company was ever even a target of Korea's proposed legislation. For another, the entire notion was vague from the get-go, with no real definition of which so-called AI companies Korea even wanted to target.
What's next for Micron?
It seems investors are coming around to my way of thinking today. The risk to Micron is low. The Korean Facebook post may never become Korean law, and even if it does, it still might not affect Micron.
Meanwhile, Micron stock is just sitting there, priced at a 35 price-to-earnings ratio but expected to grow its earnings 75% next year (according to Yahoo! Finance estimates) -- as buyable as ever.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
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