Micron (MU) stock fell more than 17% early Thursday with weaker-than-expected guidance for the current quarter despite growing demand for AI chips.
The memory chip maker, which counts Nvidia (NVDA) as a major customer, said Wednesday that it expects revenue between $7.7 billion and $8.1 billion for the quarter. Wall Street analysts had expected the company to generate revenue of $9 billion, according to Bloomberg estimates.
Micron’s forecast points to a trend in the chip industry, where sales of semiconductors used in artificial intelligence are growing rapidly, while sales of traditional chips are declining.
Micron’s High Bandwidth Memory (HBM) chips are used in Nvidia’s latest Blackwell GPUs, which are then used in data centers by hyperscalers to power their customers’ workloads and their own AI workloads. Demand for Blackwell is expected to rise in the coming year.
Micron Technology CEO Sanjay Mehrotra He said in a statement on Wednesday Data center revenue, which includes Micron memory chips used in graphics processing units, grew to more than 50% of the company’s total revenue for the first time in its fiscal first quarter ended Nov. 28. At the same time, “consumer markets are becoming weaker in the near term.”
For example, Micron said that while its HBM chips rose more than 50% in the November quarter, its mobile chip revenue fell 19%.
Micron is “exceptionally well positioned to leverage AI-driven growth to create significant value for all stakeholders,” Mehrotra said.
Vivek Arya, Bank of America analyst, downgraded the stock to neutral from buy, following its earnings results and outlook. Micron’s growing revenues from sales of memory chips dedicated to artificial intelligence are not enough to offset pressures caused by weak demand for those used in personal computers and smartphones, Arya said.
Analysts at investment firms including JPMorgan (JPM), Raymond James (RJF) and TD Cowen also lowered their price targets for the stock but maintained their buy ratings.
While Micron said weak demand in the personal computer market is taking longer than expected to recover, it pointed to increasing AI market opportunities for high-bandwidth memory semiconductors used in AI chips such as Nvidia GPUs. Micron said it expects the HBM market to grow to $30 billion in 2025, up from its previous forecast of $25 billion. The chipmaker sees its HBM revenue rising from several hundred million in its 2024 fiscal year to several billion dollars in 2025.
“Perhaps what is most surprising is not MU’s guidance, but AH stock’s reaction (after market close) given the well-understood weakness in near-term memory pricing,” TD Cowen analyst Krish Sankar said in a note Thursday. Sankar reiterated his buy rating on the stock but lowered his price target to $125 from $135.