While memory industry valuations have remained attractive and MU's wafer cuts should help, he believes memory trends near-term are weaker with China COVID restrictions, higher memory supplier inventories, and fab underutilization impacting margins.
His recent checks into the supply chain show demand weak into 2023 with China COVID restrictions impacting retail traffic and logistics from Beijing to Shenzhen and Shanghai to Zhengzhou.
His check suggested inventory at Memory suppliers and Server and Hyperscale customers higher (>8-14 weeks).
His checks also reflected pricing trending as unfavorable.
He saw fab underutilization as an added headwind to margins.
As he looks ahead to Micron earnings on December 21, he believes lower ASPs for memory could further pressure the gross margin at MU and WDC in the near term.
Price Action: MU shares traded lower by 1.47% at $54.31 on the last check Wednesday. WDC shares traded lower by 4.34% at $34.55.
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