Memory stocks slide on China chip report

What happened: Memory stocks, including Micron Technology (MU), SanDisk (SNDK), and Western Digital (WDC), experienced a selloff. Micron, trading at just 6x forward earnings with $100 billion in contracted AI-memory revenue, saw a 7% drop after reports that the Trump administration might allow Apple to source memory from Chinese suppliers. SanDisk fell 9%. This news comes as Micron's Core Data Center unit posted 87% gross margins, unlike WDC and STX with zero HBM exposure.

Market impact: The selloff was driven by concerns over increased competition from Chinese suppliers, potentially impacting the global memory market. This affected semiconductor stocks, with Micron and Western Digital both losing 7%. The selloff was deemed an overreaction by some analysts, as Chinese suppliers like CXMT and YMTC may not yet qualify for Apple iPhones.

What to watch next: Investors should monitor the U.S.-China trade dynamics, particularly around the upcoming visit of Chinese President Xi to the U.S. Additionally, Micron's earnings report on November 28 will provide insights into the company's financial health and any potential impacts from increased competition. Lastly, Apple's supplier announcements, expected in late 2023 or early 2024, could shed light on the potential involvement of Chinese memory suppliers in its supply chain.