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Jan. 7, 2020, 4:24 p.m. EST

Micron leads chip rally on growing memory-chip optimism amid CES fanfare

Qualcomm, Intel, AMD introduce new products in Las Vegas

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By Wallace Witkowski, MarketWatch


Reuters
A Micron memory chip.

Chip-related stocks rallied against the broader market Tuesday following a number of announcements from CES in Las Vegas and a growing optimism for the sector as 2020 takes hold.

The PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX -2.99%  rallied to close 1.8% higher, compared with a 0.3% decline in the S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.05%  and a less than 0.1% decline in the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -1.79% . In 2019, the SOX rallied 60.1%, its strongest performance since 2009, when the index rallied nearly 70%.

Leading Tuesday’s charge were shares of Micron Technology Inc. /zigman2/quotes/205710729/composite MU -3.41% , with a gain of 8.8% to close at $58.27, following an upgrade of the stock to outperform from market perform from Cowen analyst Karl Ackerman, who also hiked his price target on the stock to $70 from $50.

“DRAM fundamentals may improve earlier than expected, supporting MU’s improved cost position vs. peers,” Ackerman said in a note. “MU’s NAND cost headwind to 128L is known, but our analysis shows overall NAND costs are better than feared and NAND should become profitable again as new smartphone launches tighten supply.”

DRAM, or dynamic random access memory, is the type of memory commonly used in PCs and servers, while NAND chips are the flash memory chips used in USB drives and smaller devices such as digital cameras. The memory market faced a rough year as rising prices in 2018 prompted suppliers to overbuy, resulting in an inventory glut that decimated sales in 2019.

Of the 34 analysts who cover Micron, 24 have buy or overweight ratings, seven have hold ratings, and three have sell ratings, along with an average price target of $64.31, according to FactSet data.

Microchip Technology Inc. /zigman2/quotes/208326291/composite MCHP -2.82%  shares rallied 6.7% to close at $110.69 after the chip maker raised its revenue outlook for the second time in a month, and analysts hiked price targets. Of the 23 analysts covering Microchip Technology, 18 have overweight or buy ratings and five have hold ratings. Of those analysts, five hiked their price targets on the stock, resulting in an average target of $113.55.

Meanwhile at CES, Qualcomm Inc. /zigman2/quotes/206679220/composite QCOM -2.73% introduced a fully autonomous driving system late Monday that is meant to compete with Nvidia Corp. /zigman2/quotes/200467500/composite NVDA -4.74%  and Intel Corp.’s /zigman2/quotes/203649727/composite INTC -1.70%  Mobileye, and shares gained 2.8% to close at $88.97 Tuesday.

However, not all announcements resulted in gains. Also Monday, Advanced Micro Devices Inc. /zigman2/quotes/208144392/composite AMD -6.97%  announced a new line of chips for laptops at CES, in direct competition with Intel Corp. /zigman2/quotes/203649727/composite INTC -1.70%  , and a new version of its Threadripper chip that’s meant to outperform Nvidia Corp.’s offerings.

While Nvidia shares closed up 1.2% at $239.93, AMD shares declined 0.1% to close at $48.25 Tuesday. But to be fair, AMD’s stock was also the S&P 500’s largest percentage gainer for 2019.

For its part, Intel also announced new laptop and server chips late Monday along with new mobile processors code-named “Tiger Lake.” Intel shares declined 1.7% to close at $58.93.

/zigman2/quotes/210598361/realtime
US : Nasdaq
1,891.05
-58.20 -2.99%
Volume: 236,893
Feb. 21, 2020 5:16p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,337.75
-35.48 -1.05%
Volume: 2.12B
Feb. 21, 2020 5:16p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
9,576.59
-174.37 -1.79%
Volume: 2.45M
Feb. 21, 2020 5:16p
loading...
/zigman2/quotes/205710729/composite
US : U.S.: Nasdaq
$ 56.99
-2.01 -3.41%
Volume: 27.05M
Feb. 21, 2020 4:00p
P/E Ratio
18.49
Dividend Yield
N/A
Market Cap
$63.31 billion
Rev. per Employee
$832,917
loading...
/zigman2/quotes/208326291/composite
US : U.S.: Nasdaq
$ 105.08
-3.05 -2.82%
Volume: 2.02M
Feb. 21, 2020 4:00p
P/E Ratio
41.52
Dividend Yield
1.40%
Market Cap
$25.17 billion
Rev. per Employee
$352,817
loading...
/zigman2/quotes/206679220/composite
US : U.S.: Nasdaq
$ 87.03
-2.44 -2.73%
Volume: 12.26M
Feb. 21, 2020 4:00p
P/E Ratio
24.75
Dividend Yield
2.85%
Market Cap
$99.48 billion
Rev. per Employee
$607,486
loading...
/zigman2/quotes/200467500/composite
US : U.S.: Nasdaq
$ 294.07
-14.63 -4.74%
Volume: 19.23M
Feb. 21, 2020 4:00p
P/E Ratio
65.06
Dividend Yield
0.22%
Market Cap
$179.97 billion
Rev. per Employee
$882,428
loading...
/zigman2/quotes/203649727/composite
US : U.S.: Nasdaq
$ 64.34
-1.11 -1.70%
Volume: 20.78M
Feb. 21, 2020 4:00p
P/E Ratio
13.63
Dividend Yield
2.05%
Market Cap
$275.18 billion
Rev. per Employee
$659,665
loading...
/zigman2/quotes/208144392/composite
US : U.S.: Nasdaq
$ 53.28
-3.99 -6.97%
Volume: 88.55M
Feb. 21, 2020 4:00p
P/E Ratio
179.58
Dividend Yield
N/A
Market Cap
$62.32 billion
Rev. per Employee
$641,089
loading...
/zigman2/quotes/203649727/composite
US : U.S.: Nasdaq
$ 64.34
-1.11 -1.70%
Volume: 20.78M
Feb. 21, 2020 4:00p
P/E Ratio
13.63
Dividend Yield
2.05%
Market Cap
$275.18 billion
Rev. per Employee
$659,665
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Wallace Witkowski is a MarketWatch news editor in San Francisco. Follow him on Twitter @wmwitkowski.

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