Micron Technology (NASDAQ:MU) continues to be the best bargain on Wall Street, but don’t approach Micron stock unless you have a strong stomach and a long-term perspective.

Micron stock shares are down almost 24% over the last three months and are failing to maintain their late-October bounce. But if you looked at the Micron’s earnings, released Sept. 20, you would say the market gods must be crazy.

Micron easily surpassed my own $3.30 per share target, with earnings coming in at $4.3 billion, $3.56 per share, on revenue of $8.4 billion. But the stock continued to fall and opened for trade Nov. 12 at just 3.4 times last year’s earnings. That’s barely half of Ford Motor’s (NYSE:F) 6.05 times earnings! Yet even at current prices, shorts are circling.

What’s going on? Blame China.

The China Syndrome

Micron stock continues to fall because the market assumes China is about to make itself self-sufficient in memory, through Fujian Jinhua Integrated Circuit Co., which the U.S. government charges stole Micron’s trade secrets through a Taiwanese company, United Microelectronics. The two companies deny the charge.

The Fujian case is at the center of the Trump trade war. It’s the part of the trade war the industry supports, because China wants independence from U.S. suppliers and has no more scruples about it than 1790 America did.

China recently put $47 billion into its chip effort, alongside a previous investment of $47 billion, and money talks bigger than law does. China is going to make chips, including memory chips.

But Micron is not helpless in this regard. While the company maintains operations in China and Taiwan, it also has three manufacturing plants in the U.S., two in Singapore, and one in Korea. It recently announced a $3 billion expansion of its Virginia plant.

No More Super Cycle?

There’s another point driving Micron stock lower, the possible end in the “super cycle” for memory chips.

This refers to the replacement of disk memory with chips in clouds, devices and PCs, and the creation of new markets in cars, factories, and other previously-inanimate objects.

For consumers, it means 2.5 Terabyte chip drive an average retail price of $500, with even higher-capacity drives on the way. Micron has also begun production of 1.5 Gigabyte chips that consume even-less power than previous generations with circuit lines 10 nm apart. 

As with other memory chip technologies, this will remain highly-competitive. Samsung Electronics (OTCMKTS:SSNLF), SK Hynix (OTCMKTS:HXSCL), Toshiba (OTCMKTS:TOSYY) and Western Digital (NASDAQ:WDC) are also in the growing Dynamic Random Access Memory (DRAM) market.  Micron has a 21% share.

Previous market cycles were overwhelmed by new supplies, but in previous cycles memory chip prices remained much higher than prices for disk memory. In this cycle, that price difference has become irrelevant, and chip memory has always been more durable and much smaller than disk, having no moving parts. The small size of chip memory has also opened new markets.

The Bottom Line on Micron Stock

Over the near term, Micron revenue and earnings should be lower in 2019 than they were in 2018.  This means Micron stock will remain under pressure.

Artificial intelligence applications and the so-called “Internet of Things” are going to be difficult to implement. The software must still catch up to the hardware.

The automation of everything isn’t going to happen until the 2020s. Its societal impact will be as profound as that of clouds and devices in this decade, with productivity replacing millions of boring jobs and the people who had those jobs becoming easy marks for politicians.

But Micron will be at the center of it, and if you have a multi-year investment horizon this is a place you want to be.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.