MU, SNDK, STX, WDC: Memory Stocks Lead Chip Rebound After US-Iran Truce

• MU, SNDK, STX, and WDC climbed about 9% in Wednesday’s premarket sessions; NVDA gained by over 3%.
• U.S. futures gained, while oil prices slid sharply.
• The U.S. and Iran have agreed to a two-week ceasefire and the temporary opening of the Strait of Hormuz.

Shares of memory chip makers Micron, SanDisk, Seagate and Western Digital rallied about 9% in early premarket on Wednesday, leading gains in the semiconductor group, after the U.S. and Iran agreed to a temporary ceasefire and the opening of the key sea route, the Strait of Hormuz, easing concerns over prolonged volatility.

AI giant Nvidia's stock gained 3.5%, while legacy chipmakers Intel and Advanced Micro Devices surged 5% and 4.6%, respectively. Shares of Taiwan Semiconductor Manufacturing Co, which makes chips for nearly all U.S.-designed products, were up 5.4%

US-Iran Temporary Truce

President Donald Trump announced the ceasefire on social media on Tuesday evening, hours after mediator Pakistan implored him to back off his deadline for a massive attack on Iran if it didn’t meet his demands. 

The deal buys time for the two sides to reach a longer agreement to end the conflict, which had entered its second month, killed thousands of people, and sparked a global energy crisis.

Iranian Foreign Minister Abbas Araghchi said in a statement that “for a period of two weeks, safe passage through the Strait of Hormuz will be possible via coordination” with Iran’s military and that if attacks on its territory are halted, “our Powerful Armed Forces will cease their defensive operations.”

U.S. futures gained early Wednesday, while oil prices dropped over 13% to $94.49.

Analysts See Market Bottom

Stock markets could be nearing a bottom as geopolitical tensions ease and positioning resets, investors and analysts said.

Stock markets are likely to have found a floor, as the US-Iran ceasefire suggests uncertainties over the war have peaked, according to JPMorgan Chase & Co.’s equity sales desk. “Event-driven market selloffs tend to see equity markets bottom alongside peak uncertainty,” Matthew See, the bank’s head of Asia-Pacific specialist sales and market thematics, wrote in a note, Bloomberg reported.

Barclays equity strategies said the stock market was likely to experience a ‘powerful short squeeze,’ as hedge funds remove protections that were put in place to hedge the risk of further escalation in the war. “The path of least resistance for stocks is likely higher, even if the oil surge may not fully reverse quickly,” they wrote in a note.

Retail View On Chip Stocks Improves

On Stocktwits, the sentiment shifted higher for several key names, from ‘extremely bearish’ to ‘bearish’ for NVDA, from ‘neutral’ to ‘bullish’ for AMD, MU, and from ‘bullish’ to ‘extremely bullish’ for INTC.

“$NVDA Now we’re cooking, gentleman,” said a user on Stocktwits, summarizing the excited tone on various stock streams. “$INTC this ceasefire and news from yesterday will hopefully send us to $60 before the weekend,” a user posted on Intel’s stream.

“$MU who is ready to double his money!!! We are already heading to ATH again, probably this week. Forward PE of 6 and strong memory demand. We are heading to $1000 soon!” said another user, referring to Micron stock.

Some were skeptical of the sustainability of the gains. “$AMD I get a bit nervous with the level of enthusiasm here, usually that happens to a stock as it nears the top. I hope I'm wrong. Fearful this could peak tomorrow and then sell off.”

Memory Chips In Focus

Amid the insatiable interest in memory chip stocks, which have gained significantly due to shortages and rising prices, Roundhill Investments launched a sector-specific exchange-traded fund, Roundhill Memory ETF (DRAM), last week.

The fund's price jumped 1% on Tuesday, and retail sentiment has ranged between ‘bullish’ and ‘extremely bullish’ since its launch.

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