Micron Technology (MU) reversed early losses on Monday, after falling as much as 9.6% in the first hour before finishing up 0.9% at $1,142. The move came as the NASDAQ Composite gained over 2%, helping lift semiconductor names after weakness tied to the so-called Magnificent 7. Earlier pressure followed announcements from Samsung Electronics and SK Hynix on new production capacity, alongside the emergence of a class-action lawsuit alleging DRAM price-fixing involving Micron, Samsung and SK Hynix.
Filed on Thursday, 25 June, in a California federal court, the suit alleges the three companies restricted DRAM supply during the AI boom and points to prices rising 500% to 700% over four years. Separately, South Korea outlined a $518bn public-private semiconductor expansion, with Samsung and SK Hynix each planning two fabs in the country’s south-west. Jefferies forecast memory prices could rise 40%-50% next quarter and then 30%-40% in the following quarter. Micron traded down to $1,023 intraday, a swing of more than 10% in market cap, and technical levels cited include $960-$1,000, $818, and a potential move above $1,400; reference points include 1 May, 19 May, 9 June and 24 June.
Technical Signals and Options Market Dynamics
We are viewing yesterday’s massive 10% intraday reversal in Micron as a significant technical signal. The stock found strong support at its lower trendline, just as it has multiple times since May. This suggests dip-buyers are still very active and the immediate upward trend remains intact.
The market is pricing in big moves, which is perfect for options traders. 30-day implied volatility on Micron options has spiked to over 65%, up from an average of 40% last month. We see this as an opportunity to trade the expected price swings rather than just the direction.
In the short term, we believe the path is higher due to extreme supply tightness in the memory market. Recent reports from TrendForce confirm HBM chip demand, crucial for AI servers, is projected to grow 150% year-over-year, supporting forecasts of near-term memory price hikes of 40% or more. This makes buying call options expiring in the next three to six months an appealing strategy to capture the expected run toward the $1,400 price target.
Supply Cycle Shifts and Long-Term Risks
However, we must prepare for the cycle to turn. The announcement of four new South Korean fabs is a clear warning of a massive supply increase coming in a few years. We remember the last memory supercycle from 2017-2018, which was followed by a nearly 80% collapse in DRAM prices over the next year, so we are buying long-dated puts for 2028 as a hedge.
The price-fixing lawsuit also presents a serious long-term risk that the market is currently overlooking. This isn’t the first time the industry has faced these allegations, as a major case in the early 2000s resulted in over $730 million in fines for major players. Any indication that this new lawsuit is gaining traction should be seen as a signal to increase bearish positions.
