The semiconductor market has seen immense growth over the past year, and that momentum continues with Micron Technology (MU) blowing analyst expectations out of the water. Expect ETFs offering pure play exposure to the memory semiconductor industry to benefit in at least the near-term future.
Key Takeaways
- Micron beat analyst expectations on Wednesday, reporting EPS of $25.11 and revenue of $41.5 billion, while also raising Q4 revenue guidance to $49 billion to $51 billion.
- A multi-year agreement with Anthropic and soaring memory component demand from data center construction are cementing Micron’s role as a critical component in the AI infrastructure ecosystem.
- Numerous ETFs are benefiting from Micron’s earnings performance, including DRAM, RAM, and VLUE, which all include Micron as a top allocation.
Micron Surpasses Q3 Earnings Expectations
After the closing bell on Wednesday, Micron announced Q3 earnings, beating analyst expectations across the board. The company reported EPS of $25.11 and revenue of $41.5 billion, exceeding analyst expectations of $20.39 and $35.1 billion, respectively. Looking ahead to Q4, the company anticipates revenues of $49 billion to $51 billion, surpassing Wall Street expectations of $43.2 billion, according to Yahoo Finance.
On Monday prior to earnings, Micron announced a multi-year agreement with Anthropic to supply memory and storage chips to the AI developer. This deal links the demand of flagship AI models to how the infrastructure is designed, supplied, and deployed at scale.
The continued construction of data centers is driving demand for memory components known as DRAM. Micron announced DRAM revenue of $31.3 billion, beating analyst expectations of $27.5 billion.
Pure-Play Memory Strategies Capitalizing
Since its inception in early April, the Roundhill Memory ETF (DRAM) has seen returns of over 150%, and inflows of $17.5 billion. The fund provides pure-play exposure to the companies driving the physical hardware of the AI sector, requiring companies to derive at least 50% of their revenues directly from the memory components industry.
DRAM maintains a highly concentrated portfolio, with three holdings — Micron (24.25%), Samsung Electronics Co (005930) (26.49%), and SK Hynix (000660) (24.26%) — accounting for approximately 75% of the fund’s assets. Micron’s recent earnings beat serves as a major driver for the fund, due to its concentrated portfolio.
For investors seeking increased exposure to the AI memory industry, Roundhill Investments recently launched the Roundhill T-REX 2X Long DRAM Daily Target ETF (RAM). With an expense ratio of 125 basis points, the fund provides leveraged exposure to DRAM, seeking to replicate 2X the daily performance of the underlying ETF, offering investors a tactical way to magnify daily returns.
Broader Funds Benefiting
Among other funds with high allocations to Micron is the iShares MSCI USA Value Factor ETF (VLUE ). Following the fund’s semiannual May rebalance, Micron now accounts for a 23.4% weighting in the fund, with the next highest weight being Cisco Systems (CSCO) at 4.7%.
The fund tracks the MSCI USA Enhanced Value Index, which focuses on isolating value stocks from the MSCI USA Index, with a heavy emphasis on the tech sector. The strategy employs a sector-neutral and fundamentals-based methodology, to capture value across the broader market.
Due to strong earnings and cash flow growth, Micron’s fundamental metrics, forward and trailing P/E ratio, remain relatively low at 9.11 and 23.70, respectively. This is significantly lower and more value-oriented than the broader AI market, in which a company like Nvidia (NVDA) has forward and trailing P/E ratios of 22.68 and 30.47.
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