Micron collapses as AI revenue spike falls short of grandiose predictions

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Micron collapses as AI revenue spike falls short of grandiose predictions
Micron collapses as AI revenue spike falls short of grandiose predictions

The memory chipmaker’s quarterly revenue estimate failed to please investors, causing Micron’s shares to fall 5% in early trading on Thursday. Investors were expecting exceptional returns from the AI growth.

Micron saw its shares drop 5% in early trading on Thursday as investors expecting extraordinary returns from the AI boom were not impressed by the memory chipmaker’s quarterly revenue projection. As one of the few suppliers of high-bandwidth memory (HBM) chips used in cutting-edge artificial intelligence (AI) systems, the company has raised expectations by announcing that it has “sold out” of these chips for this year and the following. In the last year, Micron’s shares have more than doubled; this month, they have increased by almost 14% ahead of the results on Wednesday.

The business predicted that fourth-quarter revenue would increase by around 90% to $7.6 billion, give or take $200 million, in accordance with the average estimate of analysts. LSEG claims that at least one estimate has reached as high as $8.11 billion. “Anything less than fantastic is not good enough when your share price gets multiplied by three in just about 18 months,” remarked senior analyst at Swissquote Bank Ipek Ozkardeskaya in a note. At current prices of $134.8 billion, the chipmaker is expected to lose $8.3 billion. Analysts at Saxo Bank stated that “the market reaction underscores the high expectations for every company that is part of the AI ecosystem.” However, as the business exceeded expectations for third-quarter revenue, some analysts expressed optimism about the company’s markets.

Analysts at Goldman Sachs saw the stock’s decline “as an opportunity to add to positions” because Micron’s market share in the profitable HBM industry is still growing. Harsh Kumar from Piper Sandler held the same opinion. “At a high level, end markets for MU continue to improve with demand increasing and supply still relatively tight.” “We envision that these conditions will continue to persist at least through the vast majority of 2025 as well,” Kumar stated.

In response to the findings, at least five brokerages increased their price estimates. Based on LSEG data, Micron’s price-to-earnings ratio for the next 12 months is 17.07, which is lower than AI favorite Nvidia’s (NVDA.O) new tab of 40.22 and the industry median of 23.46.

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