Micron earnings expectations have gone vertical
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Memory chip and data storage stocks plunged Tuesday, even though few see explosive, AI-driven demand for such products abating any time soon.
Why it matters: Memory stocks have been key market beneficiaries of the AI boom. But their recent swoon reflects a micro-crisis of confidence in the AI trade.
Driving the news: U.S. memory chipmaker Micron Technology — one of the biggest gainers in the S&P 500 this year — reports results for its fiscal third quarter after the market close Wednesday, following a decline of 13.2% on Tuesday.
- It was the second-worst performer in the S&P 500, behind Sandisk (-13.6%), another high-flying data storage stock riding the AI boom.
Stunning stat: Micron shares are up over 250% so far this year, and more than 750% over the last 12 months.
- Analysts largely say that remarkable surge is justified by the soaring prices of chips Micron sells, which have supercharged profit margins.
What they're saying: "We expect Micron to report a beat-and-raise as continued pricing increases, broadening AI demand and constrained supply extend the memory upcycle," wrote Kevin Cassidy, an analyst at Rosenblatt Securities. "We believe demand remains strong enough to absorb higher pricing without meaningful demand destruction."
Yes, but: Those expectations of profit didn't prevent the recent tumble.
- The drop seems to reflect shifting investor psychology — South Korean memory chip stocks also tumbled during Monday's overnight session — rather than to any changing views on Micron's financial fundamentals.
What we're watching: How Micron trades after the numbers hit the tape Wednesday afternoon after the close of trading.
- A selloff after strong results could signal a more significant shift in sentiment among the AI bulls that investors should pay attention to.
