BofA downplays China’s threat to Micron’s AI business

Micron Technology (MU) shares dropped successful precocious July erstwhile a Chinese rival's banal marketplace debut instantly minted 1 of the country's astir invaluable companies.

Investors work it arsenic a informing motion for the world's AI representation leaders. Bank of America work the aforesaid headlines and reached the other conclusion.

On August 3, BofA expert Vivek Arya reiterated his Buy standing connected Micron and held his terms nonsubjective astatine $1,550, implying steep upside from existent levels, according to a BofA Research note. Shares climbed arsenic overmuch arsenic 8.3% that day.

That anxiousness is understandable connected the surface. CXMT, formally ChangXin Memory Technologies, held conscionable 8% of the planetary DRAM marketplace arsenic of the 2nd quarter, compared with Micron's 22%, according to Counterpoint Research information cited by CNBC. But the institution is scaling capableness astatine a gait fewer Western chipmakers person managed.

Related: Bank of America doubles down connected Micron banal terms for 2026

Some analysts expect CXMT's wafer output to scope astir 350,000 units a period by the extremity of 2026, closing successful connected Micron's ain capableness of astir 385,000, according to semiconductor probe steadfast SemiAnalysis. On paper, that looks similar an existential menace to Micron's pricing power.

BofA disagrees, and its reasoning is the existent communicative here. The bank's enactment argues CXMT's maturation is concentrated astir wholly successful commodity DRAM, the basal representation utilized successful phones and laptops, not the high-bandwidth representation that powers AI servers.

That distinction, much than immoderate capableness number, determines whether China's emergence really threatens Micron's astir profitable business.

The AI representation spread is bigger than the capableness spread

CXMT inactive lacks entree to utmost ultraviolet lithography machines, the instrumentality required to manufacture precocious representation efficiently.

Export controls person kept those tools retired of China, forcing CXMT to usage astir 30% much wafers than Micron oregon Samsung to nutrient the aforesaid measurement of chips, according to CNBC.

The institution is not expected to vessel its archetypal HBM3 chips until aboriginal this year, putting it astir 4 years down SK Hynix successful the representation AI accelerators really need, according to The Motley Fool. For Micron, Samsung and SK Hynix, that spread functions arsenic a moat.

The existent concern communicative successful representation has shifted to HBM, wherever method barriers stay steep and the 3 incumbents inactive dominate, Forbes noted successful a caller investigation of the competitory landscape.

CXMT's emergence matters for the low-margin commodity chips wrong a smartphone. It matters acold little for the representation sitting adjacent to Nvidia's astir precocious GPUs.