Key Points
Micron stock sinks on worries about competition from SK Hynix.
SK just raised $26.5 billion from a Nasdaq stock offering, and plans to increase DRAM capacity.
Micron (NASDAQ: MU) stock slid 3.9% through 11:05 a.m. ET as investors caught a case of the Mondays -- and resumed worrying about the durability of high prices for memory chips used in the artificial intelligence industry.
Image source: Micron.
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The SK Hynix "IPO"
South Korea's SK Hynix(NASDAQ: SKHY), now trading on Nasdaq as an American Depositary Receipt, is the likely catalyst for today's decline in Micron's price. SK shares soared 14% on their Nasdaq debut before turning tail this morning and selling off by more than 6%. Micron stock is following SK stock lower, and it's not too hard to understand why.
When SK debuted, its CEO stated confidently that the global market for computer memory will face its "worst-ever supply shortage" next year, and supply will remain low (and prices high) through 2030 and beyond.
This sounds like good news for Micron, which is enjoying windfall profits from these high prices right now. Problem is, SK competes with Micron, it's the dominant player in high-bandwidth memory (50% to 60% market share) and a bigger player in plain vanilla DRAM memory as well, with 29% market share -- more than Micron has.
What this means for Micron stock
This position allows SK Hynix to set prices in the HBM and DRAM markets -- which is fine for Micron for now, as prices are high. But SK is working to double its DRAM production by 2030, which will increase supply and presumably lower prices. Worse, SK Hynix's Nasdaq debut just netted it $26.5 billion in new stock sales, giving it ample funds to proceed with (or even accelerate) its expansion plans.
This will be bad news for Micron, costing it both profits and market share. This is the reason Micron stock is going down today.
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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.
