High Hopes, Hard Falls: Micron’s Share Plunge Explained

Micron Technology Inc.’s post-results selloff sent a fresh reminder to global investors about the risks inherent in bets on artificial intelligence chipmakers. Just days after leading AI chipmaker Nvidia Corp. saw its market value plummet by nearly half a trillion dollars, Micron shares fell about 8% in extended trading. This decline came after the memory maker offered a forecast that did not meet the highest estimates.

Micron is among the companies buoyed by the mania for AI-related stocks, as its high-bandwidth memory is a candidate for use alongside Nvidia’s industry-leading chips for training large language models. Despite its shares more than doubling in the year leading up to its Wednesday report, the company faced harsh market reactions for not exceeding elevated expectations, even with an outlook roughly in line with the average of analyst estimates.

“The market is holding totally unrealistic expectations, as many names who are beating street estimates by a wide margin are still being sold down,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors Pte in Singapore. “But I think the street is very well aware of the fact that these US names are pretty overcooked. Too many paper hands chasing the fast easy money.”

The big jumps in market value appear vulnerable to rapid corrections, as shown by Nvidia earlier this week when its shares entered correction territory on Monday before bouncing back. A global gauge tracking semiconductor shares has fallen about 5% since reaching an all-time high earlier this month. Taiwan Semiconductor Manufacturing Co., which produces Nvidia’s most valuable chips and is critical for AI, has slipped more than 2% since its June 19 high.

Micron’s news also triggered drops in South Korea’s two biggest companies, memory makers Samsung Electronics Co. and SK Hynix Inc., though they recouped their losses by the close on Thursday. For these businesses, whose traditional output of supplying memory for PCs, smartphones, and more conventional data center use is still recovering from a slump last year, this means a greater degree of share price uncertainty.

The US chipmaker’s briefing fell short of what SK Hynix offered earlier, when it announced that its HBM production capacity is largely sold out through 2025, said Tom Kang, director at Counterpoint Research. Micron lacks the dominant position in AI memory that SK Hynix enjoys or Samsung’s lead in the broader memory industry, he added.

“This brings a reality check to the AI sector, which looks bubblish,” Kang said.

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