Micron (NASDAQ:MU) Stocks were hit by a major sell-off during Tuesday’s trading. The memory chip specialist’s share price ended the daily session down 4.2%. Meanwhile, the S&P500 index fell by 0.3%, and the Nasdaq Composite decreased by 0.1%.
Micron’s valuation drops today in conjunction with a new report published by Edgewater Research. Edgewater thinks the demand outlook for Micron’s NAND and DRAM chips will be weaker than previously expected, and investors are responding to the analysis by getting out of the stock.
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Edgewater’s recent research note brought bearish analysis for Micron on two separate, but related fronts. First, the analysis shows that demand for NAND memory solutions is declining among original equipment manufacturers and cloud service providers. Demand for NAND solutions among data center customers is expected to rise somewhere between flat and slightly next year.
Making matters worse, Edgewater analysts also see NAND price forecasts falling across all major segments. DRAM prices are also expected to decline. Contrary to the limited supply outlook that some analysts predicted for 2025, Edgewater sees ample supply to meet demand and downward price pressure.
Micron shares have seen big swings this year as investors have tried to weigh how much near-term benefit the company will see from artificial intelligence (AI) trends. After today’s pullback, the company is now valued at less than twelve times this year’s expected earnings.
After solid revenue growth and strong earnings last quarter, the stock looks cheap by some measures. But as Edgewater’s recent report highlights, performance in the memory chip industry is heavily driven by cyclical shifts. With signs that demand and pricing for key memory solutions will be weaker than expected next year, investors may continue to be cautious on Micron’s stock. On the other hand, Edgewater also noted that the demand and pricing outlook is highly fluid, and it remains to be seen how demand among corporate customers will shape the industry backdrop.
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Keith Noonan holds positions in Micron Technology. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Micron Stock Sank Today was originally published by The Motley Fool
