Micron (MU) shares tumbled more than 17% early Thursday on weaker-than-expected expectations for the current quarter, despite growing demand for AI chips.
The memory chipmaker, which counts Nvidia (NVDA) as a major customer, said Wednesday it expects revenue of between $7.7 billion and $8.1 billion for the quarter. Wall Street analysts had expected the company to post $9 billion in revenue, according to Bloomberg consensus estimates.
Micron’s prospects point to a trend evident across the chip industry: sales of semiconductors used for artificial intelligence are growing rapidly, while sales of traditional chips are declining.
Micron’s HBM (high bandwidth memory) chips are used in Nvidia’s latest Blackwell GPUs (graphics processing units), which are then used in data centers by hyperscalers to power their customers’ artificial intelligence workloads as well as their own. Demand for Blackwell is expected to increase dramatically in the coming year.
Micron Technology CEO Sanjay Mehrotra said in a statement Wednesday that data center revenue, which includes Micron’s memory chips used in GPUs, grew for the first time in the fiscal first quarter ended Nov. 28 to more than 50% of total turnover of the company. Meanwhile, “consumer-oriented markets” are weaker in the short term.
For example, Micron said that while its HBM chips rose more than 50% in the November quarter, revenue from its mobile phone chips fell 19%.
Mehrotra said Micron is “exceptionally well positioned to leverage AI-driven growth and create substantial value for all stakeholders.”
Bank of America analyst Vivek Arya downgraded the stock to Neutral from Buy based on the earnings results and outlook. Arya said Micron’s growing revenue from sales of its AI memory chips is not enough to offset the pressure from weak demand for chips for personal computers and smartphones.
Analysts at investment firms such as JPMorgan (JPM), Raymond James (RJF) and TD Cowen also lowered their price targets for the stock, but maintained their buy rating.
While Micron said it will take longer than expected to recover from weak demand in the PC market, the company pointed to a rising AI market opportunity for its high-bandwidth memory semiconductors used in AI chips such as Nvidia’s GPUs. Micron said it expects the market for HBM to grow to $30 billion by 2025, up from its previous forecast of $25 billion. The chipmaker sees its own HBM revenues rising from several hundred million in fiscal 2024 to several billion dollars in 2025.
TD Cowen analyst Krish Sankar said in a note on Thursday: “What may have been most surprising is not MU’s guidance, but AH’s stock reaction [after the market close] given the well-known weakness in short-term memory pricing.” Sankar reiterated his buy rating on the stock, but lowered his price target from $135 to $125.
