Micron (NASDAQ:MU) stock is under pressure Wednesday, falling about 7% so far today. MU stock is pulling back as the company provides a grim warning about its business.
Just as semiconductor stocks seemed to be finding their groove, Micron is pouring cold water on the rally. Of course, it doesn’t help that the overall market is under pressure on the day as well. Today’s drop in MU stock comes after Micron said it plans to cut production in the months ahead:
“In response to market conditions, the company is reducing DRAM and NAND wafer starts by approximately 20% versus fiscal fourth quarter 2022. These reductions will be made across all technology nodes where Micron has meaningful output.”
Further, Micron added that “the market outlook for calendar 2023 has weakened.”
This news is obviously not good and doesn’t send a great signal for the rest of the chip industry. And of course, it doesn’t help that outlooks from Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC) weren’t exactly bullish endorsements when they reported earnings, either.
What Does This Mean for MU Stock and Semiconductors?
When looking at the VanEck Semiconductor ETF (NASDAQ:SMH), the exchange-traded fund hit a new multi-month high on Tuesday. In fact, SMH just hit its highest level since August. The same can be said of MU stock and many other chip stocks, for that matter.
With this group losing a bit of momentum today, investors are wondering if the recent rally is just another bear market rally rather than a new sustainable uptrend.
At this juncture, it’s impossible to say. Semiconductor stocks are leading indicators in the market and in the economy. When this group is trading well, it’s usually bullish for tech stocks, which are a big driver in the stock market. However, when the group is struggling, tech stocks often struggle as well.
In that regard, investors want to see chip stocks find support on the current dip.
Micron’s warning is understandably weighing on MU stock. While we won’t get a quarterly update from Micron until December, Nvidia (NASDAQ:NVDA) will report earnings after market close today. Investors are hoping management can tell a good story, but anything similar to Micron’s take and semiconductor stocks may be in for more pain in the short term.
Notably, today’s Micron news is also weighing on Seagate Technologies (NASDAQ:STX) and Western Digital (NASDAQ:WDC), which are down about 4% and 7%, respectively.
On the date of publication, Bret Kenwell did not hold (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.
