Micron stock (UM) fell more than 16% Thursday on weaker-than-expected forecasts for the current quarter despite growing demand for artificial intelligence chips.
The memory chip maker, which includes Nvidia (NVDA) as a major customer, said Wednesday it expects revenue of between $7.7 billion and $8.1 billion for the quarter. Wall Street analysts expected the company to post revenue of $9 billion, according to Bloomberg consensus estimates.
Micron’s outlook highlights a trend in the chip industry: Sales of semiconductors used for artificial intelligence are growing rapidly, while sales of traditional chips are plummeting.
Micron’s high-bandwidth memory (HBM) chips are used in Nvidia’s latest Blackwell GPUs (graphics processing units), which hyperscalers use in data centers to power both their customers’ and their own. artificial intelligence workloads. Demand for Blackwell is expected to skyrocket in the coming year.
Sanjay Mehrotra, CEO of Micron Technology said in a statement Wednesday that data center revenue, which includes Micron’s memory chips used in GPUs, reached more than 50% of the company’s total revenue for the first time in its fiscal first quarter ended November 28. in the short term.”
For example, Micron said that while revenue from its HBM chips rose more than 50% in the November quarter, revenue from its mobile phone chips fell 19%.
Mehrotra said Micron is “exceptionally well positioned to leverage AI-enabled growth to create substantial value for all stakeholders.”
Bank of America analyst Vivek Arya lowered his rating on the stock to Neutral from Buy following its results and outlook. Arya said Micron’s growing revenue from sales of its AI memory chips was not enough to offset pressures from weak demand for those used in personal computers and smartphones.
Analysts at investment firms including JPMorgan, Raymond James and TD Cowen also lowered their price targets on the stock but retained their buy rating.
While Micron said weak demand in the PC market was taking longer than expected to recover, it highlighted a growing opportunity in the AI market for its HBM semiconductors used in AI chips like Nvidia GPUs. Micron said it expects the HBM market to reach $30 billion in 2025, up from $25 billion previously forecast. The chipmaker sees its own HBM revenue growing from several hundred million dollars in its 2024 fiscal year to several billion dollars in 2025.
“Perhaps what was most surprising was not MU’s forecast, but the AH (after market close) stock market reaction given the well-understood weakness in short-term memory prices ” wrote Krish Sankar, an analyst at TD Cowen, in a note Thursday. Sankar reiterated his buy rating on the stock but lowered his price target to $125 from $135.