Semiconductor Sector Outlook: Cerebras and Micron Earnings to Test AI Chip Market

Investors are tracking semiconductor earnings this week to assess the bull market’s core. AI chipmaker Cerebras reports Tuesday, while Micron reports Wednesday. Micron currently shares the S&P 500’s highest implied volatility at 116, according to market data, signaling expectations for a potential 10% price swing.

Why are the Cerebras and Micron earnings reports significant?

Cerebras will release its first earnings report since going public last month on Tuesday after the bell. The stock has fallen nearly 30% from its first trading day, and options prices suggest a possible 11.5% move following the report.

Micron’s Wednesday report serves as a test for memory stocks, which have seen explosive growth. The stock reached as high as $1,204 per share on Monday, a 6% daily increase and a 280% move year-to-date.

Did You Know? Micron’s implied volatility sits at 116, which is the highest in the S&P 500, a level it shares with Sandisk and Western Digital.

How is options trading signaling market sentiment?

Call premiums for Micron accounted for $2.6 billion of the $3.3 billion in options traded on Monday, according to SpotGamma. This occurred despite balanced volumes between calls and puts.

Cerebras Stock Analysis | The Hidden Risk of a $24.6B Backlog

The market’s largest single call contract on Monday was a $61 million purchase of 800 430-strike Micron calls expiring July 17. Because these are deep in-the-money, they function similarly to owning the stock and may be less affected by the volatility drop typically seen after earnings.

Conversely, some traders are selling calls. Data from ThinkOrSwim shows that in the Roundhill Memory ETF (DRAM), 34,000 calls were sold Monday compared to just under 20,000 bought.

Expert Insight: Samantha Carter notes that the heavy concentration of deep in-the-money call buying suggests some investors are using options as a proxy for long stock positions to mitigate the volatility crush that often follows major earnings announcements.

What could happen next for AI-related stocks?

Super Micro Computer (SMCI) may see further volatility after its stock rose 16% following the announcement of a new data center blueprint using Nvidia architecture. Traders are piling into calls for the company.

According to ThinkOrSwim, more than 320,000 calls traded in SMCI compared to 64,000 puts, with traders buying nearly 10 times more calls than puts. SpotGamma reports the most popular contract is the 40-strike call expiring Friday, with over 24,000 contracts traded.

The semiconductor sector’s performance this week could provide a fresh read on the bull market’s pulse, especially following a volatile week involving SpaceX and Federal Reserve chairman Kevin Warsh’s debut.

Frequently Asked Questions

When will Cerebras report its earnings?
Cerebras is scheduled to report earnings on Tuesday after the bell.

What is the current year-to-date move for Micron?
Micron’s year-to-date move is 280 percent.

Why did Super Micro Computer’s stock increase by 16%?
The increase followed the company’s announcement of a new data center blueprint that utilizes Nvidia architecture.

Do you believe high implied volatility in semiconductor stocks signals a market peak or a growth opportunity?