Micron (MU) stock plummeted more than 17% early Thursday on weaker-than-expected guidance for the current quarter despite burgeoning demand for AI chips.
The memory chipmaker, which counts Nvidia (NVDA) as a major customer, said Wednesday it expects revenue between $7.7 billion and $8.1 billion for the quarter. Wall Street analysts had expected the company to guide for revenue of $9 billion, according to 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 used in Nvidia’s latest Blackwell GPUs (graphics processing units), which are then used in data centers by hyperscalers to power both their customers’ and their own artificial intelligence workloads. Blackwell demand is expected to soar in the upcoming year.
CEO of Micron Technology Sanjay Mehrotra said in a statement Wednesday that data center revenue, which includes Micron’s memory chips used in GPUs, grew to more than 50% of the company’s total revenue for the first time in its fiscal first quarter ended Nov. 28. Meanwhile, its “consumer-oriented markets are weaker in the near term.”
For example, Micron said that while its HBM chips rose more than 50% in 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 used 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 ratings.
While Micron said weak demand in the PC market is taking longer than expected to pick up, it pointed to a surging AI market opportunity for its high bandwidth memory semiconductors used in AI chips like Nvidia’s GPUs. Micron said it projects the market 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 year 2024 to multiple billions of dollars in 2025.
TD Cowen analyst Krish Sankar said in a note Thursday, “Perhaps what was most surprising is not MU’s guidance, but the stock reaction 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 target to $125 from $135.
