Micron Technology Inc.’s post-results selloff served as a stark reminder to global investors about the inherent risks in betting on artificial intelligence chipmakers. Just days after leading AI chipmaker Nvidia Corp. experienced a near half-trillion-dollar slump, Micron shares fell approximately 8% in extended trading. The memory maker’s forecast failed to meet the highest expectations, underscoring the volatile nature of the AI market.
Micron is among the companies that have benefited from the mania for AI-related stocks, with its high-bandwidth memory being a prime candidate for use alongside Nvidia’s industry-leading chips for training large language models. The company’s shares had more than doubled in the year prior to its Wednesday report. However, despite an outlook that was roughly in line with the average of analyst estimates, Micron was penalized for not exceeding the sky-high expectations.
“The market is holding totally unrealistic expectations, as many names who are beating street estimates by a wide margin are still being sold down,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors Pte in Singapore. “But I think the street is very well aware of the fact that these US names are pretty overcooked. Too many paper hands chasing the fast easy money.”
The significant jumps in market value appear vulnerable to rapid corrections, as demonstrated by Nvidia earlier this week when its shares entered correction territory on Monday before rebounding. A global gauge tracking semiconductor shares has fallen about 5% since reaching an all-time high earlier this month. Taiwan Semiconductor Manufacturing Co., which produces Nvidia’s most valuable chips and is crucial for AI, has slipped more than 2% since its June 19 high.
Micron’s news also triggered drops in South Korea’s two biggest companies, memory makers Samsung Electronics Co. and SK Hynix Inc., though they recouped their losses by the close on Thursday. These businesses, which are still recovering from a slump in their traditional output of supplying memory for PCs, smartphones, and conventional data center use, face a greater degree of share price uncertainty.
The US chipmaker’s briefing fell short of what SK Hynix offered earlier, when it announced that its HBM production capacity is largely sold out through 2025, said Tom Kang, director at Counterpoint Research. Micron lacks the dominant position in AI memory that SK Hynix enjoys or Samsung’s lead in the broader memory industry, he added.
“This brings a reality check to the AI sector, which looks bubblish,” Kang said.
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