Micron slumps as bleak quarterly forecast clouds AI-related boost

10:38 am Thursday, December 19th, 2024

(Reuters) -Micron Technology shares slumped about 15% on Thursday, as a bleak forecast indicating sluggish demand for personal computers and smartphones overshadowed a lift from robust growth in sales of AI-related chips.

The market for dynamic random-access memory (DRAM) chips used in personal computers and smartphones has remained under pressure since the end of the pandemic amid a lingering supply glut and sluggish consumer demand.

Micron’s flash memory chip revenue in fiscal 2025 is expected to be significantly weaker, as sales of such chips are more exposed to PC and mobile phone shipments, Morningstar analyst William Kerwin said.

The post-pandemic growth in demand for traditional PCs did not match expectations and AI-enabled computers are yet to gain mass popularity.

Adding to the industry’s woes, the expected transition to Windows 11 following Microsoft’s decision to end support for Windows 10 has been more gradual than predicted.

The company’s market value is set to fall by more than $17 billion to about $99 billion, if losses hold.

Meanwhile, revenue from the company’s high-bandwidth memory chips, a type of DRAM chip used to power advanced AI systems, more than doubled sequentially.

“Micron’s HBM story remains intact as the company has positioned itself to capitalize on market expansion opportunities from data center investments in 2025,” Piper Sandler analysts said.

The Boise, Idaho-based company is only one of the three HBM chip providers alongside South Korea’s SK Hynix and Samsung.

Demand for HBM chips has helped boost Micron’s stock by about 22% so far this year and analysts expect it to remain a key driver.

At least 10 brokerages cut their price targets on the stock following results, according to data compiled by LSEG.

Micron’s 12-month forward price-to-earnings ratio is 10.67, lower than Qualcomm’s 13.4 and Advanced Micro Devices’ 23.97.

(Reporting by Akash Sriram and Joel Jose in Bengaluru; Editing by Sriraj Kalluvila and Krishna Chandra Eluri)