What happened
Shares of computer memory maker Micron (MU +4.15%) dropped for a second day running on Tuesday, falling 5.4% in the last 15 minutes of the trading day as news broke of a potential glut in the supply of dynamic random access memory -- DRAM.
So what
As Investor's Business Daily reported today, tech industry market researcher TrendForce is predicting that DRAM prices will decline 5% sequentially in Q4 this year. Granted, that's a forecast still two quarters away. But already, it seems TrendForce can see that manufacturers of personal computers are carrying "relatively high levels of DRAM inventory because they substantially stocked up on PC DRAM beforehand in anticipation of an upcoming shortage."
And no wonder they stocked up, given that headlines all year long have declared that semiconductors of any form or function are going to be hard to come by all the way into 2023. But this new report appears to contradict that prevailing wisdom.
Indeed, "not only has PC OEMs' high DRAM inventory put downward pressure on possible price hikes for PC DRAM, but the gradual lifting of Covid-related restrictions in Europe and the U.S. will also likely lower the overall demand for notebook computers, thereby pulling down the overall demand for PC DRAM," warns TrendForce.
Image source: Getty Images.
Now what
And that might be the most important takeaway of all. If demand for personal computers is going to be weaker than expected, and if it becomes so even before 2021 is ended, that that would seem to pose a risk to demand, to pricing power, and to profit margins for all sorts of semiconductor companies. It may well be the reason that Nvidia (NVDA +0.52%) stock, too, for example, is down nearly 2% today on no apparent bad news specific to it.
Today's sell-off may have begun with Micron, the world's No. 3 producer of DRAM -- but it may not end with Micron.
