Micron Stock Gains 5% as Google’s TurboQuant Sparks 20% Valuation Gap, Eyeing Semiconductor Rally Revival
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Micron's stock rose 4.98%, contributing to a broader market surge on March 31. This rebound followed a recent pullback in memory stocks, amplified by concerns over Google's TurboQuant algorithm impacting semiconductor demand. Despite the rally, Micron remains significantly below its all-time high, partly due to increased capital expenditure forecasts. Analyst Richard Windsor suggests the market overreacted to TurboQuant, potentially leading to a 20% undervaluation of storage companies, and anticipates continued growth in memory demand, with the industry cycle peak at least a year away.
TradingKey - During the U.S. stock market session on March 31, Micron (MU) rallied strongly, closing with a gain of 4.98%. Following a collective pullback in memory stocks recently, this performance may boost investor confidence.
This rally was primarily driven by the broader U.S. market. On March 31, as both the U.S. and Iran signaled a potential end to the conflict in the Middle East, U.S. stocks surged collectively, marking the largest single-day gains since last May. The Nasdaq closed up 3.83%, the S&P 500 rose 2.91%, and the Dow jumped 1,125 points, or 2.49%.
Additionally, this rise was a technical rebound after a 10% plunge the previous day. On March 30, amid uncertainty surrounding geopolitical conflicts and Google's (GOOG) (GOOGL) newly introduced TurboQuant algorithm, which aims to improve memory efficiency for AI models, concerns over a potential slowdown in semiconductor demand intensified.
Beyond Micron, the broader semiconductor sector also saw widespread gains: SanDisk (SNDK) closed up 10.98%, while Western Digital (WDC) rose 7.48%. In Asia-Pacific markets, Samsung Electronics gained over 10% intraday on April 1, while SK Hynix saw an increase of 9.5%.
Google’s TurboQuant Sparks 20% Valuation Gap in Memory Stocks
Despite the 5% gain, Micron's share price remains down 27.5% from its all-time high set on March 18. Analysis from MarketWatch highlighted factors potentially weighing on the stock: the company raised its annual capital expenditure forecast and stated that capex could increase significantly next year as it ramps up investments in DRAM and NAND—a trend that has unsettled investors.
So far this year, Micron and other semiconductor giants have benefited from tight chip supplies and rising prices. However, the TurboQuant algorithm released by Google this month appears to have shattered the market's illusion of infinite demand expansion. Google claims that TurboQuant optimizes storage bottlenecks during the inference process of Large Language Models (LLMs), reducing memory usage and increasing computing speed without any loss in precision.
The market interpreted this as a bearish signal for Micron and other semiconductor giants. However, Richard Windsor, founder of research firm Radio Free Mobile, noted that the collective plunge in the semiconductor sector reflects an overreaction, as there are currently no signs that the tightness in memory supply has eased. He pointed out that the launch of TurboQuant has led to a collective undervaluation of storage companies by approximately 20%.
Furthermore, it remains inconclusive whether TurboQuant is fundamentally bearish for the semiconductor sector. Windsor believes that if the adoption of TurboQuant boosts computing demand, memory demand will remain high or even continue to grow. Windsor expects further upside for memory stocks and anticipates that the peak of the storage industry cycle is at least another year away.
While it remains unclear if a sector-wide recovery for memory is imminent, some analysts have already upgraded stock ratings. Bernstein analyst Mark Newman on Monday raised Western Digital's rating to Outperform. Citigroup (C) analyst Atif Malik reiterated a Buy rating on Micron but lowered the price target from $510 to $425.
