Why Micron Stock Dropped on Monday
Key Points
CXMT has made "key progress" on "4F square" technology to increase DRAM storage density.
SK Hynix and Samsung on working on similar advances.
CXMT memory chips cost as much as Korean or Western alternatives, and are "two or three generations" behind.
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Micron (Nasdaq: MU) stock sank 4.2% through 10:55 a.m. ET Monday -- and it's no great mystery why.
Three months ago, worries about the durability of artificial intelligence combined with the threat of new competition in memory chips from China to shave 36% off Micron's stock price.
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An IPO by Chinese DRAM company ChangXin Memory Technologies, or CXMT, sparked much of the selling. Today, CXMT is back in the news.
Image source: Micron.
China news today
TradingView.com says CXMT has made "key progress" on technology to increase DRAM storage density. It reports that CXMT will release a new product targeting the AI data center market later this year.
CXMT isn't the only company working on "4F square" stacked DRAM architecture. Korean rivals SK Hynix and Samsung have both announced similar progress -- but that's not necessarily good news for U.S. memory producer Micron. It still adds one more company to the list of rivals making DRAM advances, and threatening to eat into Micron's market share.
What it means for Micron stock
But here is some good news for Micron investors: Chris James, Managing Partner at U.K. and U.S. investment firm Quadri, points out the threat from CXMT may not even be as sharp as feared. Most investors first heard of CXMT when Apple asked the U.S. government for permission to buy DRAM chips from CXMT back in July. Apple reportedly changed its mind, however, when CXMT demanded prices even higher than SK and Samsung were charging for their chips!
Granted, Apple might rethink again if CXMT is making advances in DRAM tech that would make its chips worth the premium. But The Wall Street Journal reports that CXMT tech still trails Samsung, SK Hynix, and Micron "by two or three generations."
CXMT may be catching up, but it's not there yet.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Micron Technology. The Motley Fool has a disclosure policy.
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