Micron Slumps as Bleak Quarterly Predictions Cloud AI Related Gains

Micron Technology's shares tumbled nearly 15% on Thursday following a disappointing forecast that highlighted ongoing weak demand for personal computers (PCs) and smartphones. This overshadowed the company’s notable growth in sales of chips tied to artificial intelligence (AI).

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The market for dynamic random-access memory (DRAM) chips, essential components in PCs and smartphones, has faced persistent challenges since the pandemic's end. A supply glut combined with tepid consumer demand has left the sector under pressure.

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According to Morningstar analyst William Kerwin, Micron’s revenue from flash memory chips in fiscal 2025 is expected to decline significantly. These chips are particularly vulnerable to fluctuations in PC and smartphone shipments. The anticipated post-pandemic resurgence in traditional PC demand has fallen short of expectations, and AI-enabled computers have yet to gain widespread traction among consumers.

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Another factor dampening growth is the gradual adoption of Microsoft’s Windows 11. Despite Microsoft's decision to phase out support for Windows 10, the transition to the newer operating system has been slower than anticipated.

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If Micron’s losses persist, its market valuation could drop by over $17 billion, bringing its total worth to approximately $99 billion. However, the company’s high-bandwidth memory (HBM) chips—used in advanced AI systems—provided a bright spot. Revenue from these chips more than doubled sequentially, underscoring their potential in driving future growth.

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Piper Sandler analysts remain optimistic about Micron’s position in the HBM market, stating, "Micron’s HBM story remains intact as the company has positioned itself to capitalize on market expansion opportunities from data center investments in 2025."

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Micron, based in Boise, Idaho, is one of only three global providers of HBM chips, alongside South Korean tech giants SK Hynix and Samsung. Demand for these specialized chips has been a major contributor to the company's stock performance, which has risen about 22% this year. Analysts predict HBM chips will remain a key growth driver for the company moving forward.

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Despite this, at least 10 brokerages reduced their price targets for Micron after the release of its latest results, according to data compiled by LSEG. While the company faces challenges in traditional markets, its 12-month forward price-to-earnings ratio of 10.67 remains competitive. This figure is lower than Qualcomm’s 13.4 and significantly below Advanced Micro Devices’ 23.97, suggesting that Micron's valuation may still offer potential opportunities for investors.

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As the tech landscape evolves, Micron’s dual narrative of struggles in conventional markets and promise in AI-driven segments highlights the complexities of navigating the semiconductor industry in the post-pandemic world. While challenges persist in core markets like PCs and smartphones, the growing importance of AI-related applications provides hope for a brighter future.

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