Micron tumbles as AI revenue surge falls short of lofty expectations

By Kanchana Chakravarty

(Reuters) -Micron shares fell 5% in early trading on Thursday after the memory chipmaker's quarterly revenue forecast failed to impress investors looking for outsized results powered by the AI boom.

The company, one of the few providers of high-bandwidth memory (HBM) chips that power advanced AI systems, has said it had "sold out" those chips for this year and the next, driving up expectations.

Micron's shares have more than doubled in the past year, including an about 14% run-up this month ahead of the results on Wednesday.

The company forecast fourth-quarter revenue to rise about 90% to $7.6 billion, plus or minus $200 million, in line with analysts' average estimate. At least one estimate had been as high as $8.11 billion, according to LSEG.

"Anything less than fantastic is not good enough when your share price got multiplied by three in just about 18 months," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank in a note.

The chipmaker is set to lose $8.3 billion at current levels of $134.8.

"The market reaction underscores the high expectations for every company that is part of the AI ecosystem," said analysts at Saxo Bank.

Some analysts, however, were positive about the firm's markets, after the company beat estimates for third-quarter revenue.

Goldman Sachs analysts viewed the stock's pullback "as an opportunity to add to positions" as the brokerage continues to see market share gains for Micron in the lucrative HBM market.

Piper Sandler's Harsh Kumar had a similar view. "At a high level, end markets for MU continue to improve with demand increasing and supply still relatively tight."

"We envision that these conditions will continue to persist at least through the vast majority of 2025 as well," Kumar added.

At least five brokerages raised their price targets following the results.

Micron has a 12-month forward price-to-earnings ratio of 17.07, compared with AI darling Nvidia's 40.22 and the industry median of 23.46, according to LSEG data.

(Reporting by Kanchana Chakravarty in Bengaluru; Editing by Saumyadeb Chakrabarty and Sriraj Kalluvila)