Micron’s Memory Test: Can It Chip Away at Its Losing Streak?
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Micron Technology, Inc. (Ticker: MU) is set to report quarterly earnings later this month, presenting a potential opportunity for short-term traders. While MU has underperformed other semiconductor stocks—especially compared to sector leader NVIDIA Corporation (Ticker: NVDA)—there are signs that it might be forming a base after a challenging year.
With the semiconductor sector facing shifting dynamics, MU may be an interesting trade idea given the looming earnings and other potential catalysts.
Semiconductor Stocks: Rotation and Uncertainty
Semiconductors like MU were among the hottest tech plays earlier in 2024, driven by surging demand for artificial intelligence (AI) chips and optimism about future growth. NVIDIA’s dominance, fueled by its leadership in AI-related semiconductors, has overshadowed the broader sector, including MU. More recently, the tech spotlight has shifted to other areas, such as software, as investors rotate within the broader tech sector.
Whether semiconductors regain leadership remains a wildcard. With MU trading below its 50-day moving average* and attempting to stabilize over the last four months, its upcoming earnings report could act as a key inflection point for the stock and potentially for the broader semiconductor sector.
Below is a daily chart of MU as of December 4, 2024.
Source: StockCharts.com, December 4, 2024.
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results.
MU’s Earnings: Key Catalysts to Watch
MU is expected to report quarterly earnings on December 18. The consensus Wall Street estimate is earnings of $1.74 per share*, compared with a loss of 95 cents a share in the year-earlier period, according to TipRanks.
MU’s earnings release will likely center on a few critical factors that traders should monitor closely. Here are three main catalysts:
Memory Market Dynamics: Supply, Demand, and Pricing
Micron is a key player in the DRAM and NAND memory markets, which have faced oversupply issues in recent quarters. The company has been navigating a challenging pricing environment as demand for PCs and consumer electronics slowed post-pandemic.
- Bullish angle: Signs of stabilization or improvement in memory prices could signal that the worst is over for Micron, potentially sparking renewed investor interest.
- Bearish angle: If MU’s outlook reveals continued pricing pressures or sluggish demand recovery, it could suggest the stock’s underperformance isn’t over yet. Pay close attention to management’s commentary on supply-demand dynamics and any updates to capacity reductions or pricing expectations.
Data Center and AI-Driven Growth Potential
While NVIDIA dominates the AI narrative, MU has exposure to AI-related growth through its memory chips, which are critical for data center and AI workloads. Traders will want to see if Micron can demonstrate that it is capturing some of this high-growth market.
- Bullish angle: Strong guidance for AI-related demand could position MU as a secondary play on AI growth, especially if management highlights increasing adoption of high-bandwidth memory (HBM) or collaborations with key data center players.
- Bearish angle: If AI-driven demand doesn’t materialize meaningfully in MU’s results or guidance, it could reinforce the narrative that the company is lagging behind its peers in capturing this trend.
Guidance and Forward-Looking Statements
MU’s forward guidance will likely be the make-or-break factor for traders. The market will be scrutinizing the company’s projections for revenue, margins, and capital expenditure (CapEx)* plans.
- Bullish angle: Optimistic guidance that points to a recovery in demand or improving gross margins could catalyze a short-term rally.
- Bearish angle: Weak guidance, particularly if MU highlights persistent challenges in the memory market or margin pressures, could lead to a retest of recent lows. Traders should also keep an eye on commentary related to geopolitical tensions, given Micron’s exposure to China and potential restrictions on its operations.
Trading Micron With Leverage in Both Directions
For short-term traders, MU’s earnings represent a potential high-volatility* event. The stock’s underperformance relative to semiconductors and its current technical setup mean that it could be poised for significant movement in either direction, depending on the outcomes of these key catalysts.
- For bulls: Signs of stabilization in memory markets, stronger AI-driven demand, or a guidance beat could create upside momentum.
- For bears: Persistent pricing pressures, weak forward guidance, or disappointing AI-related growth could keep MU under pressure.
For traders interested in trading MU with leverage or as an inverse, Direxion Daily MU Bull 2X Shares (Ticker: MUU) and Direxion Daily MU Bear 1X Shares (Ticker: MUD) seek daily investment results, before fees and expenses, of 200%, or 100% of the inverse (or opposite), respectively, of the performance of the common shares of Micron Technology, Inc. (Ticker: MU).
*Definitions and Index Descriptions
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
The Funds have derived all disclosures contained in this document regarding Micron Technology, Inc. from publicly available documents. In connection with the offering of each Fund’s securities, neither the Funds, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Funds, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding Micron Technology, Inc. is accurate or complete. Furthermore, the Funds cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of Micron Technology, Inc. have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Micron Technology, Inc. could affect the value of a Fund’s investments with respect to Micron Technology, Inc. and therefore the value of the Funds.
Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund’s investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund’s other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning.
Leverage Risk – The Bull Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with MU and may increase the volatility of the Bull Fund.
Daily Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with MU and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to MU is impacted by MU’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to MU at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to MU increases on days when MU is volatile near the close of the trading day.
Daily Inverse Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with MU and therefore achieve its daily inverse investment objective. The Bear Fund’s exposure to MU is impacted by MU’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to MU at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to MU increases on days when MU is volatile near the close of the trading day.
Micron Technology, Inc. – MU faces risks associated with the highly competitive nature of the semiconductor industry; economic and market uncertainty; reductions in demand for its products; potential concentration of revenues in a few large clients as among other risks.
Semiconductor Industry Risk – Semiconductor companies may face intense competition, both domestically and internationally, may have limited product lines, markets, financial resources or personnel and may face risks related to the availability of materials.
Technology Sector Risk — The market prices of technology-related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities.
Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, and Cash Transaction Risk. Additionally, for the Direxion Daily MU Bear 1X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.