Micron's Rally Hits a Political Crossroads: Trump's China Summit and South Korea's Tax Proposal Shake Confidence

Just days after Micron Technology touched a fresh yearly peak of €676 in Frankfurt, the stock took a sharp U-turn. A South Korean government official floated a special levy on AI-related profits, sparking a sell-off that erased roughly 8% of the US-listed shares in a single session. The move dragged the stock back toward $730, snapping a run that had seen the chipmaker gain about 142% since January.

The pullback landed at an inopportune moment. On May 14 and 15, Micron CEO Sanjay Mehrotra is expected to join President Donald Trump in Beijing for talks with Chinese President Xi Jinping. The agenda spans trade, artificial intelligence, export controls, Taiwan, and the Iran conflict. For Micron, the stakes are especially high: Beijing banned the company’s products from critical infrastructure in 2023, and the company has been searching for ways to resume and expand compliant shipments ever since.

A Heated Rally Meets Profit-Taking

The secondary jolt came from Seoul’s tax proposal, which immediately dampened investor sentiment across Asia. The pullback was compounded by higher-than-expected US inflation data and a glaring overbought signal on the charts. The Relative Strength Index had spiked to 85 before the retreat – a level that often invites profit-taking. In Frankfurt, where Micron shares had been changing hands at €675.10 earlier in the week, the RSI stood at 77.9, still deep in overbought territory.

None of this, however, reflects a deterioration in the company’s operating performance. Micron’s fiscal second-quarter revenue reached $23.86 billion, a 196% surge from the prior year. Gross margin leapt to 74%, underscoring the pricing power that comes with AI-driven demand. The company has effectively locked in its entire high-bandwidth memory (HBM4) production for 2026 under binding contracts, with customers now signing three- to five-year agreements – a stark departure from the short-cycle ordering that once defined the commodity memory business.

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Supply Tightens on Multiple Fronts

Capital expenditure for the current fiscal year has been raised to more than $25 billion, reflecting the aggressive buildout of production capacity. Yet even that may not be enough to keep up with demand: both HBM and NAND memory are sold out for the next two years with no spare capacity available. A potential wildcard is a labour dispute at rival Samsung Electronics. Tens of thousands of workers in South Korea are planning to strike for nearly three weeks starting at the end of May. Any prolonged disruption at Samsung could tighten supply further and bolster Micron’s pricing leverage.

Analysts have responded by raising their targets. Deutsche Bank lifted its price objective from $550 to $1,000, while Mizuho increased its target to $740. D.A. Davidson also set a $1,000 price target, all pointing to the structural transformation of the memory industry. As a sign of confidence, Micron recently boosted its quarterly dividend by 25%.

Washington Adds Pressure

Back in the political arena, Micron is also pushing for tighter US controls on China’s chip industry. The MATCH Act, which has advanced through a House committee, would tighten export restrictions on chipmaking equipment and compel allies like Japan and the Netherlands to align their rules within 150 days. Beijing has already condemned the move, setting the stage for a tense exchange during the upcoming summit.

Micron at a turning point? This analysis reveals what investors need to know now.

Mehrotra’s presence in the US delegation underscores how intertwined corporate strategy and geopolitics have become for Micron. The company is reportedly withdrawing from selling server chips to Chinese data centers due to a sluggish recovery, while continuing to supply foreign customers with operations in China, such as Lenovo. Any easing of restrictions after the Beijing talks would provide fresh fuel for an already blistering rally. But if tensions escalate and countermeasures materialise, the stock – already trading at technically stretched levels – could face a more prolonged correction.

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