(Bloomberg) — Micron Technology Inc.’s post-earnings selloff sent a fresh reminder to global investors about the risks inherent in betting on artificial intelligence chipmakers.
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Days after Nvidia Corp., the leading maker of AI chips, fell nearly half a trillion dollars, shares of Micron fell about 8% in extended trading after the memory maker offered guidance that fell short of high estimates. In a sign of the extreme volatility in AI-related stocks, the Micron news also triggered a slide in South Korea’s two largest companies, Samsung Electronics Co. and SK Hynix Inc., as suppliers of memory chips powering the AI supply chain.
Micron is one of several companies that have benefited from the mania for AI-related stocks, as its high-bandwidth memory is a candidate for use alongside Nvidia’s cutting-edge chips for training large language models . Its shares more than doubled in the year leading up to its Wednesday report, but — even with an outlook roughly in line with the average of analyst estimates — the company was punished for failing to beat lofty expectations.
“The market has completely unrealistic expectations because many names that are well above estimates are still being sold,” said Andrew Jackson, head of Japanese equity strategy at Ortus Advisors Pte in Singapore. “But I think the street is very aware that these American names are pretty overcooked. Too many paper hands are chasing quick and easy money.
The momentum of the global AI frenzy took a hit earlier this week when shares of Nvidia entered correction territory on Monday before rebounding. A global indicator that tracks semiconductor stocks has fallen about 5% since hitting an all-time high earlier this month.
For companies like Micron, whose traditional production of memory for PCs, smartphones and more conventional data center use is still recovering from last year’s downturn, that means a large degree of stock price uncertainty.
The US memory maker’s briefing fell short of what SK Hynix had offered earlier, when it announced that its HBM production capacity would be largely exhausted until 2025, Tom Kang said. director of Counterpoint Research. Micron does not have the dominance in AI memory that SK Hynix enjoys or in the broader memory sector that Samsung has, he added.
“This brings the AI industry back to reality, which seems to be sparkling,” Kang said.
The relentless rise of U.S. mega-caps seen as benefiting from AI has pushed their stocks to historically high valuations. Micron shares are valued at 4.5 times projected sales over the next 12 months, compared to an average of 2.2 times over the past 10 years.
–With the help of Abhishek Vishnoi.
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