Why Did Micron Stock Pop Today?
Key Points
Micron is spending $50 billion on two new factories in Boise -- and $200 billion worldwide.
The cost of Micron's building spree is 20x the cash Micron has to pay for it.
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Micron (NASDAQ: MU) stock took another tumble Tuesday after The Wall Street Journal reported it will spend $50 billion building two new chip factories in Boise, Idaho.
One day later, investors seem to have gotten over their freak-out. Shares that slid 3% yesterday are leaping ahead 6.9% through 11:50 a.m. ET Wednesday, winning back all of yesterday's losses -- and more.
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What's Micron up to in Idaho?
Motivated by unprecedented tightness in global DRAM supply, which is driving the price of this particular flavor of semiconductor chip through the roof, Micron is "rushing to add manufacturing capacity," reports the Journal.
Current plans are to spend $50 billion to double Micron's 450-acre Boise campus, including building two new 600,000-square-foot factories. The first will open in mid-2027, and the second before the end of 2028. Both will be put to work churning out DRAM chips for High Bandwidth Memory (HBM) in artificial intelligence data centers.
At the same time, the Journal reports Micron is building a $100 billion factory near Syracuse, NY, and a smaller $9.6 billion factory in Hiroshima, Japan. These and other investments, says the paper, all add up to a $200 billion effort to "break the AI memory bottleneck."
Is Micron stock a buy?
With DRAM and HBM prices through the roof, it makes sense Micron would want to cash in. There's just one problem: Micron doesn't actually have $200 billion. According to S&P Global Market Intelligence data, its cash reserves are actually closer to $10 billion.
Granted, in today's market, Micron's generating lots of cash flow, more than $22 billion before accounting for all the capital spending it's doing. That might pay off if DRAM prices stay high.
If the semiconductor cycle turns lower too soon, however, look out below.
Should you buy stock in Micron Technology right now?
Before you buy stock in Micron Technology, consider this:
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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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