Why Micron Stock Just Dropped
Key Points
China appears to have passed on an opportunity to buy H200 artificial intelligence chips from Nvidia.
President Trump says China wants to develop its own chip industry instead, with potential implications for Nvidia -- and for Micron, too.
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It's getting hard to tell where Nvidia (NASDAQ: NVDA) stock stops, and Micron (NASDAQ: MU) stock starts.
Over in China, bad news is emerging from the just-concluded Trump-Xi summit. Yesterday, it was reported the U.S. will permit Nvidia to sell H200 artificial intelligence chips to 10 Chinese companies. Today, the news is that no sales actually happened.
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Upon discovering this, investors sold off Nvidia stock by 3.4% -- and Micron investors sold off their stock by 5.5%, as of 11:50 a.m. ET.
Image source: Getty Images.
Why Nvidia's news might be bad news for Micron
According to The Wall Street Journal, President Trump pooh-poohed the lack of an H200 deal, explaining Chinese buyers didn't buy Nvidia chips at the summit simply "because they chose not to. They want to try and develop their own." Later reporting confirmed that the would-be Chinese buyers, including giant companies like Alibaba (NYSE: BABA) and ByteDance, were in fact not "authorized" by the Chinese government to buy Nvidia chips.
Maybe this was done to deny the U.S. President an immediate win at the summit, and sales agreements eventually will be signed. It's also possible, though, that China is serious about wanting to "develop their own" semiconductor industry, and willing to pass on more advanced Nvidia chips temporarily to do this.
What's next for Micron
That could be bad news for Nvidia and Micron in the long term if China succeeds in developing advanced chips that can compete with U.S. companies on global markets. Near-term, though, I honestly don't see a lot to worry about here.
Insatiable demand for AI chips, and for the NAND and DRAM chips Micron makes to pair with them in data centers, means Micron can always find other buyers if China chooses not to buy. Today's news is simply not a great reason to sell.
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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 and Nvidia. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
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