Micron (MU) investors took some profits, sending shares of the memory chip maker down 4% in Wednesday afternoon trading.
But the day’s move did little to dent an impressive run in the stock this month.
Micron shares are up 40% since the beginning of April, as investors have grown bullish on demand for memory chips amid the broader artificial intelligence spending boom.
A shortage of memory chips critical for the data centers has driven prices up, leading the few memory chip makers, including Micron, SK Hynix (000660.KS), and Samsung (005930.KS), to focus on those higher-margin chips over the chips that go into consumer products like laptops.
Analysts expect memory chip shortages, especially for Dynamic Random-Access Memory (DRAM), to persist until 2028, providing support to chip prices. That has been reflected in companies’ valuations: SK Hynix and Samsung stocks are up about 75% since the beginning of the year.
Simultaneously, Micron and other memory chip makers have been plagued by concerns about greater AI efficiency that could lessen demand for memory and whether Micron could sustain its torrid growth rate.
Although Micron stock has risen 50% year to date, it nearly erased those gains at one point following a major post-earnings slide in March.
“[Micron fiscal Q3 gross margin] guide of 81.0% could be near peak cycle, eventually stabilizing toward 60-70% historical high prior to AI,” BofA Global Research’s Vivek Arya wrote in a note at the time.
Some on the Street still see continued upside for the stock, riding on the powerful demand trend.
“Despite sentiment around memory that has turned very negative post MU’s gross margin guidance, we continue to believe we are in the midst of a super-cycle that will likely defy traditional analytical norms for the stock,” UBS analysts wrote in a note last week.
“Ultimately, growing evidence that memory companies are willingly trading some near-term upside for longer-term visibility — and by extension, more stable earnings, margins, and ROE across the cycle — strengthens our conviction of the durability of this upcycle.”
Yahoo Finance tech editor Daniel Howley contributed reporting.
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