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Here’s Why Micron Technology Stock Dropped 4% Despite Investment Plans

Story Highlights

Micron’s $40 billion investment is expected to improve the supply chain challenges and create about 40,000 new jobs. Meanwhile, top investors are also loading up on the stock, indicating solid growth prospects for the company.

Computer memory and data storage manufacturer Micron Technology, Inc. (NASDAQ: MU) recently announced that it will invest $40 billion in the United States over the next decade to expand leading-edge memory manufacturing in multiple phases. In spite of the euphoria around the upcoming investment, shares of the company declined by almost 4%. This is because the company expects to report lower revenues in the current quarter due to weak demand for computer memory chips.

Notably, Micron is slated to report its fourth quarter results on September 27, 2022.

Micron’s Investment to Enhance National Security and Create Jobs

Micron’s investment is aimed at enhancing the capabilities of U.S. national security and ensuring supply chain resilience. Furthermore, the investment is expected to create 40,000 new jobs, including 5,000 technical and operational roles at Micron.

Notably, with demand in key segments like auto, data center, artificial intelligence, and 5G expected to grow rapidly, the latest investment should further solidify Micron’s position as a leading player in the chip manufacturing space.

The $280 billion CHIPS Act is aimed at supporting the U.S. semiconductor industry and reducing dependency on China. While also addressing the chip shortage issue, the Act proposes $52 billion in subsidies to chip manufacturers and $24 billion in tax credits for chip plants.

Is Micron a Good Long-Term Investment?

Even amid lower revenue guidance for the current quarter, top investors are loading up on Micron stock as they remain convinced of the company’s long-term growth. Notably, this massive impending investment, aided by the CHIPS Act, has also given confidence to these investors.

TipRanks’ Stock Investors tool shows that top investors currently have a Very Positive stance on MU. Further, 10.3% of the top portfolios tracked by TipRanks, increased their exposure to MU stock over the past 30 days.

Overall, the Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 19 Buys, four Holds, and two Sells. The MU average price target of $78.36 implies the stock has an upside potential of 32.5% from current levels. Shares have declined 22.1% over the past year.

Key Takeaways

Micron’s massive investment plans come at an opportune time for the company as it looks to leverage its memory chip manufacturing capabilities aided by the CHIPS Act. Although the company expects the revenues to be down for the current quarter, this is expected to be a temporary blip, as the stock, with an upside potential of 32.5%, remains well-positioned to take advantage of the recent regulatory tailwinds.

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