Stock surge of Micron Corporation today
The tech industry is abuzz with the latest development in the ongoing trade negotiations, as President Donald Trump announced tariffs on imported semiconductors. This move has sent the stock of Micron Technology, a leading semiconductor manufacturer, soaring by 2.9% through 10:30 a.m. ET.
The tariffs, which are 100% on imported semiconductors, including those manufactured by Micron, have the potential to significantly impact the company's costs and competitiveness. If Micron imports chips or components, their costs could rise substantially, potentially leading to higher prices for their products.
However, there's a silver lining. The White House has indicated exemptions for chip makers investing in U.S. production. Given that Micron has significant U.S.-based manufacturing, it might be able to avoid some tariffs, giving it a competitive advantage versus fully foreign producers.
The tariffs could also spark a broader push for domestic chip production. Apple's recent $600 billion U.S. investment in semiconductor-related manufacturing is a testament to this trend. If tariffs shift supply chains domestically, U.S.-based chipmakers like Micron could potentially gain market share.
Despite the potential strategic benefits, the tariffs pose risks of cost increases and demand contraction. Wall Street analysts predict less than 5% long-term earnings growth for Micron. The uncertainty caused by the tariffs announcement has also cast a shadow over the semiconductor industry.
Micron's stock may not appear too expensive at first glance, with a trailing earnings multiple of less than 20. However, its price-to-free-cash-flow ratio is pushed past 64 due to its low free cash flow. The company's real free cash flow is less than $1.9 billion.
It's important to note that the tariffs do not apply to semiconductors manufactured abroad for import into the U.S. President Donald Trump has also stated that there will be no charge on semiconductor manufacturing plants built in the United States or those that have committed to build.
Micron is actively expanding its domestic presence, with semiconductor manufacturing plants under construction in New York State and Boise, Idaho. Yet, the company remains a sell according to analysts.
In conclusion, the 100% tariff on imported semiconductors poses risks of cost increases and demand contraction but also potential strategic benefits for Micron if it capitalizes on exemptions and domestic production growth incentivized by the tariff policy.
- Micron's potential for avoiding some tariffs could be beneficial for its competitiveness in the finance sector, as it invests in U.S. production.
- The tariffs on imported semiconductors could lead to higher costs for companies like Micron, but domestic chip production could provide a competitive edge in the business world.
- Wall Street analysts are predicting less than 5% long-term earnings growth for Micron Technology, highlighting the potential risks of the tariffs in finance and economics.
