Daily Brief - Micron Tech Drags Down Semi Stocks

TLDR: Big Tech had a rough day, with Micron Technology Inc. missing lofty expectations and pulling the sector down with it.

Micron's lackluster outlook has put the spotlight on the risks of relying too heavily on AI chip makers to drive stock rallies. The company’s shares tumbled as much as 8% in premarket trading, bringing down other big names like Nvidia Corp.

The broader market's attempt to move beyond its reliance on megacap stocks was short-lived. Weak market breadth measures have cast doubt on the rally’s sustainability, especially in a 'higher for longer' interest rate environment.

With reports on economic growth and weekly unemployment claims on deck for Thursday, and key inflation figures due Friday, traders are bracing for more volatility. Fed Governor Michelle Bowman recently dashed hopes for imminent rate cuts, adding to the uncertainty.

Investor jitters over market concentration were also evident as hedge funds aggressively offloaded tech stocks in June, the same month Nvidia briefly became the world's largest company.

According to Goldman Sachs, semiconductor and semiconductor equipment stocks saw the most significant sell-offs.

Scenario Spotlight: What next for Micron?

Historically, Micron stock tends to rebound 8%, on median, in the quarter following a 15% drop in price over a week.

Market Movers: Moral of the story: Buy NVIDIA

Here is the historical 3-month response from Micron's peers following a one-week decrease in the stock's price:

1. Nvidia (nvda): 15.88%
2. Taiwan Semiconductor ADR (tsm): 12.09%
3. Broadcom (avgo): 12.08%
4. ASML Holding ADR (asml): 11.84%
5. Texas Instruments (txn): 8.81%
6. Micron (mu): 8.10%
7. Intel (intc): 6.38%
8. Applied Materials (amat): 5.45%
9. AMD (amd): 0.48%