Micron inventory slumps as weak outlook overshadows AI alternatives

Microns (IN) inventory fell greater than 17% early Thursday on weaker-than-expected steering for the present quarter, regardless of rising demand for AI chips.

The reminiscence chip maker, which incorporates Nvidia (NVDA) as a serious buyer, stated Wednesday it expects income of between $7.7 billion and $8.1 billion for the quarter. Wall Avenue analysts anticipated the corporate to submit income of $9 billion, in keeping with Bloomberg consensus estimates.

Micron’s outlook highlights a pattern seen within the chip trade: Gross sales of semiconductors used for synthetic intelligence are rising quickly, whereas gross sales of conventional chips are plummeting.

Micron’s high-bandwidth reminiscence (HBM) chips are utilized in Nvidia’s newest Blackwell GPUs (graphics processing items), that are then utilized in information facilities by hyperscalers to energy each their clients’ and their very own synthetic intelligence workloads. Demand for Blackwell is anticipated to skyrocket within the coming yr.

Sanjay Mehrotra, CEO of Micron Expertise said in a statement Wednesday that information middle income, which incorporates Micron’s reminiscence chips utilized in GPUs, reached greater than 50% of the corporate’s whole income for the primary time in its fiscal first quarter ended November 28. within the quick time period.”

For instance, Micron stated that whereas its HBM chips grew greater than 50% within the November quarter, income from its cell phone chips fell 19%.

Mehrotra stated Micron is “exceptionally properly positioned to leverage AI-enabled development to create substantial worth for all stakeholders.”

Financial institution of America analyst Vivek Arya lowered his score on the inventory to Impartial from Purchase, following its outcomes and outlook. Arya stated Micron’s rising income from gross sales of its AI reminiscence chips was not sufficient to offset pressures from weak demand for these utilized in private computer systems and smartphones.

Analysts at funding corporations, together with JPMorgan (JPM), Raymond James (RJF), and TD Cowen additionally lowered its worth targets on the inventory however maintained its purchase score.

Whereas Micron stated weak demand within the PC market was taking longer than anticipated to recuperate, it pointed to a rising alternative within the AI ​​marketplace for its high-bandwidth reminiscence semiconductors utilized in AI chips like Nvidia GPUs. Micron stated it expects the HBM market to achieve $30 billion in 2025, up from $25 billion beforehand forecast. The chipmaker sees its personal HBM income rising from a number of hundred million in its 2024 fiscal yr to a number of billion {dollars} in 2025.

TD Cowen analyst Krish Sankar stated in a word Thursday: “What was most shocking might not have been MU’s forecasts, however how shares reacted. [after the market close] given the well-understood weak point within the worth of short-term reminiscence. Sankar reiterated his purchase score on the inventory however lowered his worth goal to $125 from $135.

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