Micron Technology Inc.’s post-results selloff sent a fresh reminder to global investors about the risks inherent in bets on artificial intelligence chipmakers. Days after leading AI chipmaker Nvidia Corp. saw nearly half a trillion dollars wiped off its market value, Micron shares fell about 8% in extended trading following a forecast that fell short of the highest estimates.
Micron is among the companies buoyed by the mania for AI-related stocks, as its high-bandwidth memory is considered a candidate for use alongside Nvidia’s industry-leading chips for training large language models. Despite its shares more than doubling in the year prior to its Wednesday report, the company was penalized for not exceeding elevated expectations, even though its outlook was roughly in line with the average of analyst estimates.
“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 big jumps in market value appear vulnerable to rapid correction, as shown by Nvidia earlier this week when its shares entered correction territory on Monday before bouncing back. A global gauge tracking semiconductor shares fell about 5% since reaching an all-time high earlier this month. Taiwan Semiconductor Manufacturing Co., which makes Nvidia’s most valuable chips and is considered critical 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. For these businesses, whose traditional output of supplying memory for PCs, smartphones, and more conventional data center use is still recovering from a slump last year, that means 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. The industry’s spectacular growth has been hard to properly gauge, and elevated expectations have made AI firms like Nvidia volatile. As AI continues to expand, investors will need to temper their expectations and be wary of the inherent risks in this rapidly evolving sector.
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