Micron (MU) inventory plummeted greater than 17% early Thursday on weaker-than-expected steering for the present quarter regardless of burgeoning demand for AI chips.
The reminiscence chipmaker, which counts Nvidia (NVDA) as a significant buyer, mentioned Wednesday it expects income between $7.7 billion and $8.1 billion for the quarter. Wall Road analysts had anticipated the corporate to information for income of $9 billion, in accordance with Bloomberg consensus estimates.
Micron’s outlook factors to a pattern seen throughout the chip business — gross sales of semiconductors used for synthetic intelligence are rising quick, whereas conventional chip gross sales stoop.
Micron’s excessive bandwidth reminiscence (HBM) chips are utilized in Nvidia’s newest Blackwell GPUs (graphics processing models), that are then utilized in information facilities by hyperscalers to energy each their prospects’ and their very own synthetic intelligence workloads. Blackwell demand is anticipated to soar within the upcoming yr.
CEO of Micron Know-how Sanjay Mehrotra mentioned in an announcement Wednesday that information heart income, which incorporates Micron’s reminiscence chips utilized in GPUs, grew to greater than 50% of the corporate’s complete income for the primary time in its fiscal first quarter ended Nov. 28. In the meantime, its “consumer-oriented markets are weaker within the close to time period.”
For instance, Micron mentioned that whereas its HBM chips rose greater than 50% within the November quarter, income from its chips for cell phones fell 19%.
Mehrotra mentioned Micron is “exceptionally effectively positioned to leverage AI-driven progress to create substantial worth for all stakeholders.”
Financial institution of America analyst Vivek Arya downgraded the inventory to Impartial from Purchase, following its earnings outcomes and outlook. Arya mentioned Micron’s rising income from gross sales of its reminiscence chips for AI aren’t sufficient to offset pressures from weak demand for these utilized in private computer systems and smartphones.
Analysts at funding companies together with JPMorgan (JPM), Raymond James (RJF), and TD Cowen additionally lowered their value targets on the inventory however saved their Purchase rankings.
Whereas Micron mentioned weak demand within the PC market is taking longer than anticipated to select up, it pointed to a surging AI market alternative for its excessive bandwidth reminiscence semiconductors utilized in AI chips like Nvidia’s GPUs. Micron mentioned it tasks the marketplace for HBM to develop to $30 billion in 2025, up from its prior forecast of $25 billion. The chipmaker sees its personal HBM income hovering from a number of hundred million in its fiscal yr 2024 to a number of billions of {dollars} in 2025.
TD Cowen analyst Krish Sankar mentioned in a observe Thursday, “Maybe what was most stunning isn’t MU’s steering, however the inventory response AH [after the market close] given the well-understood weak spot in near-term reminiscence pricing.” Sankar reiterated his Purchase score on the inventory however lowered his value goal to $125 from $135.
