Micron Revenue Miss Sparks Market Reaction
Micron Technology Inc., the largest U.S. maker of memory chips, has experienced its steepest stock drop since March 2020. Shares fell 17% to $86.13 after the company announced revenue projections that fell short of analyst expectations. Micron predicts sales of $7.9 billion for the fiscal second quarter, well below the $8.99 billion average forecast.
Mixed Results for AI and Consumer Markets
While Micron is benefiting from a surge in demand for AI-related components, sluggish sales in smartphones and personal computers remain a challenge. These consumer markets make up a significant portion of Micron’s chip volume. Data center-related revenue increased by 400% year-over-year, now contributing to more than half of the company’s total sales. However, this growth wasn’t enough to offset declining demand from consumer-focused markets.
Inventory Challenges Continue
Micron’s customers are working through a backlog of inventory, exacerbating the decline in consumer orders. The company anticipates that this inventory adjustment period will be brief, with healthier levels expected by spring. However, its mobile business unit saw a 19% sequential decline due to these reductions, with automotive and industrial sales also falling.
Strategic Investments in High-Bandwidth Memory
To address market volatility, Micron is focusing on high-bandwidth memory (HBM) technology, which is essential for AI computing systems. This product allows Micron to command higher prices but is complex to produce. Despite the challenges, HBM represents a promising avenue for sustained demand in the memory-chip sector.
Micron’s disciplined approach to adding new production, shared with South Korean rivals SK Hynix and Samsung, has mitigated the impact of inventory gluts. This strategy contrasts with previous boom-and-bust cycles, where prices often dipped below production costs.
Spending and Future Market Projections
Micron is budgeting $14 billion for new plants and equipment in fiscal 2025. This includes reduced spending on storage chip production to align with current market dynamics. The company predicts modest growth in the PC market of around 5% in 2025, with most of the expansion occurring in the latter half of the year.
Despite these projections, Micron acknowledges that consumer PC upgrades are happening more slowly than anticipated. This trend may hinder near-term recovery in demand for memory chips.
Navigating a Shifting Market
Micron dual focus on AI-related products and disciplined production strategies positions it for future opportunities. However, the company must navigate the complexities of balancing supply with evolving market demand. While AI computing offers a beacon of growth, ongoing weakness in consumer-driven markets remains a significant hurdle.