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Can New Investments Help Micron (MU) Stock Turn Around?

  • Micron (NASDAQ:MU) is announcing a plan to invest $40 billion in chip manufacturing.
  • The news comes as President Joe Biden signs the CHIPS Act into law.
  • Still, the company acknowledges a declining demand for chips.
MU stock - Can New Investments Help Micron (MU) Stock Turn Around?

Source: Charles Knowles / Shutterstock.com

Chip stocks have gotten a major boost in recent weeks thanks to Congress. Policymakers’ big plan to bring chip manufacturing back to the U.S. will funnel billions into the market. This is leading to a big chip spending spree, and Micron Technology (NASDAQ:MU) is getting in on the action. However, the company is not completely bullish on chips. So, will this news be what’s needed to kickstart MU stock gains?

Earlier today, President Joe Biden signed the CHIPS Act into law. This bill will subsidize the production of new chip manufacturing facilities across the U.S. A host of chip makers are lining up plans to open new plants in the country, including both American-born companies like Intel (NASDAQ:INTC) and those based overseas like Taiwan Semiconductor (NYSE:TSM).

Who obtains these subsidies is still up in the air, but investors are jumping on the opportunity to snatch up chip stocks before the manufacturing boom hits. Micron is one of them, announcing today a $40 billion investment in chip manufacturing. Known primarily for its computer memory and storage manufacturing, the company will be using the investment to beef up its chip making capabilities.

Micron says it will be announcing more details in the coming days. What we do know is this investment will fund the effort through 2030 and produce 40,000 American jobs, including 5,000 specialist roles. It adds production will begin in the second half of this decade.

Will Chip Manufacturing Help MU Stock?

The news is huge for struggling Micron. Indeed, MU stock is a far cry from its early 2022 prices and is looking for new catalysts. However, the company isn’t counting on this news to be the sole piece of the puzzle. Micron is very clear today that it is investing in chip manufacturing during a period of industry turmoil.

As the company comes forth with its massive $40 billion plan, Micron also acknowledges the chip market is in a tricky place. The company says chip demand is actually falling, even in the wake of the CHIPS Act news. It warns investors that sales projections will be lower than previous guidance in the fourth quarter, and revenue will miss projections.

The company evidences this claim by noting orders have shrunk since its last update a month ago. It adds this drop in orders doesn’t just come from the personal computer industry, but also from data centers, industrial and automotive markets. These warnings come just after Nvidia (NASDAQ:NVDA), AMD (NASDAQ:AMD) and Intel adjusted their expectations for the rest of the year to reflect the drop in demand.

It’s obvious Micron’s investment is more of a long-term plan than a quick cash grab in the wake of the CHIPS Act hype. Still, MU stock is suffering blows, dropping 4% at the market’s close. Investors are being quick to jump on the discount, though; volume is surging north of 32 million shares, a sizable increase from the stock’s daily average trading volume of 18 million shares.

On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Brenden Rearick is a Financial News Writer for InvestorPlace’s Today’s Market team. He mainly covers digital assets and tech stocks, with a focus on crypto regulation and DeFi.


Article printed from InvestorPlace Media, https://investorplace.com/2022/08/can-new-investments-help-micron-mu-stock-turn-around/.

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