Micron (MU) stock plummeted greater than 17% early Thursday on weaker-than-expected guidance for the present quarter despite burgeoning demand for AI chips.
The memory chipmaker, which counts Nvidia (NVDA) as a significant customer, said Wednesday it expects revenue between $7.7 billion and $8.1 billion for the quarter. Wall Street analysts had expected the corporate to guide for revenue of $9 billion, in line with Bloomberg consensus estimates.
Micron’s outlook points to a trend seen across the chip industry — sales of semiconductors used for artificial intelligence are growing fast, while traditional chip sales slump.
Micron’s high bandwidth memory (HBM) chips are utilized in Nvidia’s latest Blackwell GPUs (graphics processing units), that are then utilized in data centers by hyperscalers to power each their customers’ and their very own artificial intelligence workloads. Blackwell demand is predicted to soar within the upcoming 12 months.
CEO of Micron Technology Sanjay Mehrotra said in an announcement Wednesday that data center revenue, which incorporates Micron’s memory chips utilized in GPUs, grew to greater than 50% of the corporate’s total revenue for the primary time in its fiscal first quarter ended Nov. 28. Meanwhile, its “consumer-oriented markets are weaker within the near term.”
For instance, Micron said that while its HBM chips rose greater than 50% within the November quarter, revenue from its chips for mobile phones fell 19%.
Mehrotra said Micron is “exceptionally well positioned to leverage AI-driven growth to create substantial value for all stakeholders.”
Bank of America analyst Vivek Arya downgraded the stock to Neutral from Buy, following its earnings results and outlook. Arya said Micron’s growing revenue from sales of its memory chips for AI aren’t enough to offset pressures from weak demand for those utilized in personal computers and smartphones.
Analysts at investment firms including JPMorgan (JPM), Raymond James (RJF), and TD Cowen also lowered their price targets on the stock but kept their Buy rankings.
While Micron said weak demand within the PC market is taking longer than expected to select up, it pointed to a surging AI market opportunity for its high bandwidth memory semiconductors utilized in AI chips like Nvidia’s GPUs. Micron said it projects the marketplace for HBM to grow to $30 billion in 2025, up from its prior forecast of $25 billion. The chipmaker sees its own HBM revenue soaring from several hundred million in its fiscal 12 months 2024 to multiple billions of dollars in 2025.
TD Cowen analyst Krish Sankar said in a note Thursday, “Perhaps what was most surprising will not be MU’s guidance, however the stock response AH [after the market close] given the well-understood weakness in near-term memory pricing.” Sankar reiterated his Buy rating on the stock but lowered his price goal to $125 from $135.