Micron Technology Plummets 4.7%—Bearish Tech or Bullish Setup?

• MU slumps to $118.62, down 4.7% intraday, trading between $117.02 (day low) and $120.43 (day high).
• Kerr Neilson’s $81M stake and Mizuho’s $150 PT contrast with Edgewater’s dire chip demand warning.
• RSI neutral at 51.7, with price below 30-day MA ($116.62) but within 52W range ($61.54–$129.85).

Micron’s volatile session reflects clashing fundamentals: strong AI/HBM growth vs. near-term margin pressures. The stock’s 46.76% YTD gains now face a pivotal test as technicals turn cautious.

Edgewater’s Chip Demand Warning Overpowers Bullish Catalysts
Micron’s steep decline stems from Edgewater Research’s stark warning that memory chip demand and pricing will weaken in H2 2025. The analyst cited ‘sub-seasonal’ trends and a ‘bias lower,’ undermining Micron’s free cash flow outlook despite Q3 earnings beats. While institutional investors remain bullish (80.84% ownership), the immediate concern lies in margin compression as DRAM/HBM supply dynamics shift. This contrasts sharply with recent optimism around its 25% HBM market share target and $17B 2026 revenue potential.

Semiconductor Sector Mixed as AI vs. Margin Battles Intensify
Micron’s struggles mirror broader semiconductor sector headwinds. Intel’s 500+ job cuts in Oregon highlight industry-wide cost pressures, while GlobalFoundries’ MIPS acquisition underscores strategic bets on AI IP. However, Taiwan’s Hana Tech breaking into glass substrates and Rockchip’s AIoT gains show pockets of resilience. MU’s 4.7% drop lags Intel’s -0.75%, but its premium valuation (21.5x PE vs. sector averages) makes it vulnerable to near-term supply-demand concerns.

Bearish Options Signal Short-Term Pressure—Two Picks to Watch
• Technicals: 200-day MA ($98.24) holds long-term support, but 30-day MA ($116.62) now resistance. RSI neutral (51.7), Bollinger Bands suggest $116–$123 range.
• Trading Setup: Aggressive traders may fade rallies toward $119–$120 resistance. Short-side plays dominate with theta decay favoring puts. Watch $117 for a breakdown—sustained closes below could test $114.
• Top Picks:
- MU20250718P112 (Put, Strike $112): IV 41.5%, Leverage 396%, Delta -0.106. High turnover ($192k) and gamma 0.0317 make this ideal for a sustained drop. If MU falls to $108 by expiration, payoff hits $10/contract (+60%).
- MU20250718C115 (Call, Strike $115): IV 39.3%, Leverage 25.8%, Delta 0.77. Despite bearish bias, this offers inverse protection if HBM-driven rallies surprise. Break above $118 could spike delta to 0.8+, but theta -0.867 limits time decay.
Hook: If $117 fails, MU20250718P110 ($110 strike) offers 792% leverage for aggressive shorts.

Backtest Micron Technology Stock Performance
The backtest of MU's performance after a -5% intraday plunge shows a significant positive return, with a strategy return of 191.74% and an excess return of 291.74% compared to the benchmark return of -100.00%. The strategy achieved a maximum drawdown of 0.00%, a Sharpe ratio of 0.74, and a volatility of 32.56%. This indicates that the strategy effectively managed risk and generated strong returns despite the initial plunge.

MU Faces Crossroads—Hold or Fold on AI’s Long Game?
Micron’s slide isn’t yet a death knell for its AI narrative, but short-term risks are real. Bulls cling to its HBM leadership and 46% YTD gains, while bears eye weak free cash flow and Edgewater’s demand red flags. The stock’s fate hinges on H2 execution: can it sustain pricing while expanding HBM4 adoption? Traders should monitor $116 support and sector peers like INTC (-0.75%). For now, the options market signals caution—positioning for a $110–$115 floor while tracking HBM market share updates. Action: Fade rallies above $119; keep stops below $114 for speculative longs.