Key Points
The broader market is rallying today, but Micron isn't participating in the bullish momentum.
The memory chip leader's shares are under pressure due to concerns about competitive risks from China-based rival CXMT.
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Despite the bullish backdrop for the broader market, Micron (NASDAQ: MU) stock is in the red in Monday's trading. The company's share price was down 0.3% as of 1:05 p.m. ET. Meanwhile, the S&P 500 and the Nasdaq Composite were up 1.2% and 1.9%, respectfully.
Micron stock was down as much as 6.4% soon after the market opened, but it has managed to regain substantial ground as the day has progressed. While the stock is up 684% over the last year as of this writing, it's also down 32% from its high.
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Competitive risks from China continue to pressure Micron
According to a recent report from Reuters, ChangXin Memory Technologies is considering opening another memory chip factory in Beijing. Micron has seen massive sales and earnings growth in conjunction with demand for memory chips used in artificial intelligence (AI) processors and other AI hardware, and pricing power has played a big role in the company's incredible profitability surge. Investors are concerned that CXMT and other rivals could flood the market with cheaper memory chips and lower costs in the category.
What's next for Micron?
Micron stock has faced bearish pressures recently, but the stock is still up massively over the last year. Despite huge gains across the stretch, Micron is still only valued at roughly 11 times next year's expected earnings. Even more striking, the company has signed long-term supply deals with many leading tech companies -- which should significantly reduce the risk of a cyclical downturn within the next several years. Micron's long-term contracts don't mean that the company is immune to competitive threats from Chinese memory chip suppliers and other players in the space, but they do signal that top hardware and computing-focused companies see demand constraints continuing for the foreseeable future.
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Keith Noonan has positions in Micron Technology. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
