Micron (MU) sits at the epicenter of the dynamic random access memory (DRAM) trade – one of the quintessential artificial intelligence (AI) bottlenecks. As a result, the stock has become a freight train.
The shares are up 75% year-to-date. At its current pace, Micron could graduate to the $1 trillion club from its current market capitalization of $842.2 billion. Add it all up and there are plenty of opportunities for short-term traders to make use of the Direxion’s Daily MU Bull 2X Shares (MUU), an ETF designed to deliver 200% of the daily returns of this scorching hot semiconductor stock.
As a leveraged ETF, MUU should only be used over short holding periods. This needs to be remembered when trades get as hot as Micron is today. Still, betting against Micron and MUU could be dangerous over the near-term.
MUU Can Move Higher
Experienced semiconductor investors know that memory, including DRAM, is the famously the most cyclical part of the industry. However, demand for the chips produced by companies like Micron has shifted from cyclical to structural. That diminished cyclicality bolsters the case for Micron. It also potentially presents traders with more opportunities to make short term use of Direxion’s MUU.
“Surging demand for AI accelerators and inference hardware can dramatically boost revenue for semiconductor firms. If adoption outpaces forecasts, chipmakers across memory, logic, and networking could see windfall gains,” analyst Jay Goldberg at Seaport Research Partners wrote in a report out last week.
Indeed, there are scores of superlatives attached to Micron stock. Entering Monday, the stock rose in 11 of the prior 15 trading sessions, having more than doubled since March. It’s up more than 700% over the past year, confirming traders that occasionally used MUU over that period we’re rewarded.
As for using MUU over short holding periods going forward, there’ a case for that as well because some market observers believe there’s gas in the respective tanks of DRAM stocks.
“Analysts are increasingly talking about a supercycle in the sector that could last beyond the end of next year as chipmakers are considering deals with their customers to build more capacity and boost supply,” reported CNBC.
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