Micron needs a new memory boost
Subscribe to enjoy similar stories. Micron Technology has long been a roller coaster for investors. But the past few months in particular have been enough to induce some acute motion sickness.
Since hitting an all-time high three months ago, the memory-chip maker’s stock price has plunged 41%. That is far beyond the drubbing most other chip stocks have taken in that time, as the market has begun to cool on artificial-intelligence hype. Micron rode that wave well: When the company reported its fiscal third-quarter results in late June, its share price had logged a 12-month gain of 118%, second only to Nvidia among stocks on the PHLX Semiconductor Index over that period, according to data from S&P Global Market Intelligence.
Why such a harsh turn? Despite booming demand for AI systems that use a specialized—and expensive—form of memory, much of Micron’s business still comes from personal computers and smartphones. Those are mature markets that have picked up sales slightly this year but still tend to grow at low single-digit rates at best. Makers of PCs and smartphones also began building up inventory of DRAM memory in the first half of this year, anticipating higher prices in the second half.
That inventory buildup—along with weaker sales of PCs and smartphones in the second half—is now expected to weigh on the pricing gains that producers such as Micron have been enjoying of late. Some have also worried about potential oversupply for high-bandwidth memory, or HBM, used in AI systems, as more producers have entered that market. “We believe HBM demand is intact and calls for oversupply next year are unsubstantiated," wrote Brian Chin of Stifel in a report last week.
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