If someone were to tell me that Micron Technology (MU) would report an upside surprise of a pretty substantial magnitude and it would be unchanged I would say they would be crazy.
But that's what happened on Dec. 19 when it reported EPS of $2.45 vs. a consensus of $2.19.
How can this be? I think that the answer may be a budding consensus on Wall Street that thinks that the commodities of DRAM and flash are peaking for the cycle.
You get further confirmation from the disappointing stock prices for Applied Materials (AMAT) and Lam Research (LRCX) which, too, haven't come near their highs for the year.
Is supply out of balance with demand sooner than we thought? My judgment is that may very well be the case because I believe the end markets themselves remain robust.
What's intriguing here is that neither Intel (INTC) nor Texas Instruments (TXN) has seen any diminution of its rally. The same can't be said about Western Digital (WDC) , however, even after a Toshiba settlement with what I thought were very advantageous terms.
People always ask me "what do you worry about" as if I am supposed to have some incredible geopolitical or interest rate-driven response. To me, though, it's this potential peaking that I am concerned about. It flies in the face of almost all analyst commentary and it tells me that unless we see some "era of good feeling until the end of the year" spirit these stocks have to be avoided for now.
What people should be wary of is a further spreading to other techs and talk of a slowdown in the sainted data center growth. I don't see that being the case right now, but I am wary simply because Micron should be much higher given the lack of degradation in DRAM and only the smallest of declines in the pricing for flash.
Just something to monitor. But monitor closely.
