Micron's macro miss

It turns out not every chipmaker that AI touches immediately turns to gold.

Micron, which manufactures memory chips and data storage, slipped 16.28% today after the firm reported lukewarm forward-looking guidance for its second quarter.

The not-so-great news:

• Micron reported adjusted earnings per share of $1.79, beating the $1.75 analysts expected for its fiscal Q1.
• Revenue came in at $8.71 billion, meeting analyst expectations.
• Micron expects revenue of ~$7.9 billion and adjusted EPS of ~$1.43 in the coming quarter, well below analyst expectations of $8.98 billion and EPS of $1.91.

Most of Micron’s chips are dynamic random-access memory (DRAM) chips, which are mainly used for desktop computers and servers. Its high-bandwith memory (HBM) chips, which are a subset of DRAM chips, are the good stuff: They’ve seen skyrocketing demand due to their use in building servers that power artificial intelligence. The company said on its earnings call that it expects the HBM market to top $30 billion in 2025, above its previous forecast of $25 billion.

The weak outlook wasn’t due to any slowdown from Micron’s AI data center business, but waning demand from consumers for personal electronics, including smartphones and computers.

CEO Sanjay Mehrotra acknowledged the numbers weren’t any Christmas miracle, but had a more optimistic longer-term view. “While consumer-oriented markets are weaker in the near term, we anticipate a return to growth in the second half of our fiscal year,” he said.

A tough end to an “OK” year

Before today’s earnings flop, Micron was already underperforming the S&P 500, up 22% compared to the broader market’s gain of roughly 29% in 2024.

Compare that to other AI hardware companies, such as Nvidia and Broadcom, which have gained about 174% and 102%, respectively, this year.

That said, analysts see today’s downturn as an opportunity to buy. The vast majority of analysts covering the stock give it a “buy” rating, and the average price target of $135 is 55% higher than shares are trading right now.

“We continue to believe Micron’s leadership in HBM will be transformational for margins and its market position,” explained UBS analyst Timothy Arcuri in a note.

If you’re looking for a last-minute holiday bargain for your portfolio, it might be Micron.—LB