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Apple Drops, Micron Leaps on Monday

Plus500 | Tuesday 11 April 2023

As we move further into spring, a confluence of trends are shaking the global technology sector. Broad-based shifts in global demand for personal computers as well as supplies of crucial semiconductor chips are having effects on the stock market. Let’s take a closer look:

An image of a semiconductor microchip

Apple’s Computer Crunch

After generally avoiding a drop in demand for their proprietary product line throughout the fourth quarter of 2022’s holiday season, it seems that Apple (AAPL) may be feeling the strain of reduced enthusiasm for computer purchases in the new year. 

In Q4 of last year, Apple emerged relatively unscathed from the Christmas season drop in PC sales, marking a mere 2% shipment decline as compared to an industry average drop of more than a fifth. However, the first quarter of 2023 has not been so kind to this industry giant’s bottom line, with shipments down by 40% compared to the year ago figures.

Furthermore, the ailments of this industry sector have been far from limited to Apple. Other leaders in the computer market such as HP (HPQ) and Dell (DELL) have also recorded marked drops in shipments over Q1 2023, of about 24% and 31% respectively. Despite these falls, the two firms’ shares have remained attractive so far in 2023, with HP rising by over 10% and Dell by 3%.

So what could be causing such deep cuts in the desire of computer users to refresh their gadget inventories? According to some analyses, the PC industry’s current state is due to the aftershocks of the COVID-19 pandemic. Demand for computers spiked during the era of widespread lockdowns and stay-at-home orders, so current sales numbers compared to those from the height of the pandemic will naturally be lower. Inventories may even remain above long-term trend levels until nearly the end of the year.

With weakening shipment numbers across the industry, it may come as no surprise that Apple’s stock value dropped by 1.6% on Monday. Much of where Apple, and the computer sector as a whole, heads this year depends on the overall economic environment. It remains to be seen whether a general market recovery could reignite consumer confidence, or alternatively, if a recessionary atmosphere leads them to reconsider upgrading their current computer models.

Micron Powers Up

While PC sales as a whole may be facing strong headwinds at the moment, one key chip-maker seems to be making the best of the prevailing market conditions. Micron (MU) shares jumped by over 8% on Monday, April 10th, marking the firm’s best results on Wall Street in over a year.

The Idaho-based chipmaker specialises in two specific types of chips, known as NAND and DRAM. The latter, direct random access memory chips, are generally geared toward personal computers, while the former are formatted for smaller gadgets such as USB drives and smartphones.

One of Micron’s most prominent competitors in the DRAM chip arena is Korean industry titan Samsung. However, given the drop in prices seen across the market, Samsung announced to the public last Thursday, April 6th, that the firm would be instituting deep production cuts in order to preserve the market value of its product line. With Samsung DRAM chips occupying about half of the market, this decision was a boon for industry peer Micron. 

The drop in demand for personal computers mentioned above has affected the market for direct random access memory chips as a whole in recent times, as approximately ten percent of DRAM chips are used in PCs. Given prevailing market conditions, Micron has already cut production, leaving it well poised to make the most of Samsung’s following in its footsteps.

Furthermore, despite Micron reporting its largest loss ever on March 28th, of $2.3 billion, some analysts posit that demand for DRAM chips to be used in handsets and data centres could buoy prices in the months ahead. Whether Micron shares can sustain yesterday’s blockbuster market results is as yet unknown. (Source:Market Watch)

The tech industry as a whole has been through a multitude of ups and downs in recent years as it is intimately tied to the overall state of the economy. With market volatility and uncertainty regarding near- and medium-term trends still looming large, what comes next for tech giants is anybody’s guess.

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