Micron's Surge: Here's Why $1,000 Mark Still Matters for ETFs

What Led to the Immediate Dip?

MU slumped sharply on Aug. 18, with the selloff extending beyond the stock to the broader semiconductor sector due to rising rate worries.

A prevailing uncertainty around the U.S.-Iran conflict pushed oil prices higher, raising concerns about inflation and potentially higher-for-longer interest rates. That is particularly negative for high-valuation technology stocks.

Read on to know why the MU Stock is still worth the price.

Apple’s Memory Procurement Can Become a Key Catalyst

The next major catalyst could come from Apple’s AAPL memory-sourcing decision, as Apple might move away from Chinese suppliers. Therefore, the U.S. and allied memory manufacturers could witness additional demand.

This does not automatically mean that Apple will select Micron as its sole memory supplier. However, any expansion of Micron's role in Apple's supply chain could strengthen expectations for revenue growth and pricing power.

AI Demand Is Already Supporting Memory Trade

Artificial Intelligence (AI) data centers require large quantities of advanced memory, particularly high-bandwidth memory, while the demand for conventional Dynamic Random Access Memory and NOT AND persists, supported by servers, personal computers and smartphones. This has helped it turn from a traditionally highly cyclical semiconductor segment into one of the major beneficiaries of the AI infrastructure buildout.

ETFs in Focus

The key question for investors is whether the recent memory rally is being driven merely by short-term momentum or a longer-lasting combination of AI demand, constrained supply and geopolitical reshoring of semiconductor supply chains.

If the latter continues, Micron's strength could increasingly spill over into Micron-heavy ETFs. Investors should note that Micron currently has a Zacks Rank #3 (Hold). Also, the stock has an upbeat Growth Score of A.

iShares MSCI USA Value Factor ETF VLUE tracks the performance of the MSCI USA Enhanced Value Index that measures the performance of U.S. large- and mid-capitalization stocks with value characteristics and relatively lower valuations, before fees and expenses.

VLUE holds a massive weightage of 20.69% of MU in its portfolio. It has assets under management worth $9.74 billion and an expense ratio of 0.15%. The fund trades at an average daily volume of 1.32 million shares. VLUE presently sports a Zacks ETF Rank #1 (Strong Buy). 

Strive U.S. Semiconductor ETF SHOC is a focused semiconductor ETF that gives investors exposure to U.S.-listed semiconductor companies, particularly firms benefiting from AI, data-center expansion and rising chip demand. The fund holds 12.95% of MU in its portfolio.

SHOC has assets under management worth $242.10 million and an expense ratio of 0.40%. The fund trades at an average daily volume of 21,605 shares. SHOC currently flaunts a Zacks ETF Rank #1. 

iShares Semiconductor ETF SOXX is a semiconductor-focused ETF that provides exposure to companies across the semiconductor value chain, including chipmakers and semiconductor-equipment manufacturers.

Micron holds assets of 8.58%. A stronger memory cycle could therefore benefit SOXX while also spreading the risks across other semiconductor companies.

SOXX has assets under management worth $43.41 billion and an expense ratio of 0.33%. The fund trades at an average daily volume of 10.34 million shares. SOXX presently sports a Zacks ETF Rank #1. 

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This article originally published on Zacks Investment Research (zacks.com).

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