Micron Shares Nosedive Despite Beating Revenue Estimates

Micron Technology’s share price has fallen 7.2% in extended trading after its earnings report, just after Nvidia’s stock saw a similar drop.?

That is despite exceeding estimates for Q3 revenue. The strong performance was fuelled by continuing demand for its memory chips. Still, investors appear to have been spooked by the immediate forecast.?

It could also point to an ongoing trend in the market, raising questions about the stability of AI investments.?

Micron’s stock had risen 13% this month. The drop in price has been attributed to a weaker-than-expected outlook for the current period.?

The Idaho-based semiconductor manufacturer has set adjusted earnings per share of $1.08 against revenue of $7.6 billion in this quarter. Some analysts indicated earnings per share worth $1.05 on revenue of $7.6 billion.?

The company’s CEO, Sanjay Mehrotra, discussed the continued prospects of its AI operations while noting the modest market conditions facing its smartphones and PC interests.?

Mehrotra intimated that Micron’s AI-focused offerings would likely increase in price due to “robust demand for data center products.” He also added on a call with analysts that its high-bandwidth memory, used in advanced chips, is fully subscribed through 2025.

AI Market Concerns

This varied market performance follows the highly volatile example of Nvidia in recent days. The leading global supplier of AI chips went from the high of becoming the world’s most valuable company on June 18 to the low of suffering the largest three-day loss ever recorded on the stock market.?

Nvidia was sitting pretty with shares at $136, delivering a valuation of $3.34 trillion. Still, within three days, the tech heavyweight had lost 13% of its value, worth a staggering $646 billion.?

The situation has led to questions of a potential overvaluation of the chip maker but in a wider context, it points to market concerns on the stability of AI investments.?

Neville Javeri, portfolio manager at Wellspring Global Investments, mentioned “AI fatigue” as a possible reason for the drop. He explained that investors might be getting tired of the constant hype around AI and are becoming more cautious. He also noted worries about market concentration, where a few large companies dominate, increasing the risk if those companies falter.

Market reactions are likely to have been a contributor to the Nvidia drop. Its flamboyant figurehead, Jensen Huang, sold some of his shares which could have been interpreted as a sign of uncertainty on their future growth.

Another factor to an extent, would have been end of quarter rebalancing, when investors look to shore up their overall holdings leading to selling Nvidia stock. Any notable pattern like this would have contributed to the decline.?

The next steps will be interesting for Micron and the wider AI market. There is no immediate fear for their prospects and performance, but market conditions will always affect their fortunes.