Goldman Sachs chip analyst James Covello today downgraded both Micron (MU) and Novellus (NVLS) to Sell from Neutral, citing expectations that DRAMs will be in excess supply throughout 2008, despite a roughly 40% drop in DRAM-related capital spending.

Micron, of course, is a leading DRAM manufacturer. Covello says there is “no valuation support for the stock” after a recent rally in the shares, “given that both DRAM and NAND fundamentals are poised to take another leg down in 2008, driven by excess supply.” He thinks other analysts have been too early trying to call the bottom in DRAMs, and predicts “several rounds of Street estimate cuts as the year progresses.”

Novellus is a key equipment supplier to the memory sector. “Street estimates for Novellus remain too high and see no valuation support for the stock at current levels,” Covello wrote today. “While management’s constructive outlook for 2008 is based on a recovery in memory orders, our work suggests that memory will remain weak for all of 2008, leading to further order declines.”

This morning, Micron is down 14 cents, or 1.9%, at $7.25. Novellus is down 83 cents, or 3.4%, at $23.88.