Post-Vista Memory Glut: Stay Away from Chip Stocks

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The Memory Glut of 2007 by Bill Alpert

Highlighted companies: Micron Technology Inc. (MU), QIMONDA AG ADS (QI), Microsoft Corp. (MSFT)
Summary: Since last summer PC makers have been urging computer buyers to stock new systems with plenty of DRAM in anticipation of Microsoft Corp.'s (MSFT) memory-intense Vista OS. Customers listened: average DRAM per PC went up to 1GB and spurred a major boost in DRAM sales, and share prices have followed. But with new systems now selling with more than enough DRAM for Vista, the market may be hit with a chip-glut due to increased manufacturing capacity in Korea and Taiwan, and a reduction in transistor size that is increasing the bit-yield per wafer by 50%. Micron Technology Inc. (MU) shares are already down 33% from their summer highs on rising inventories and softening NAND flash demand, while other chip makers shares are still near their "Vista-ready" heights. Given 2007's potential for oversupply of both DRAM and NAND, Technology Trader Bill Alpert says it's no time to be chasing memory stocks.
Related: Micron's Net Up 200%, Beats Street, Sales Miss, But DRAM Demand Strong, Micron Facing A Tough Near Term Picture, Five Stocks For The Microsoft Vista Cycle, Micron Diversifying Away From DRAM Production, Micron Technology F4Q06 Earnings Conference Call