AI Stocks: Why Micron's Shares Plummeted Despite Earnings

Published Date: 28/06/2024

Micron Technology's shares fell despite robust artificial intelligence demand and strong earnings. The stock's premium valuation and conservative guidance may have contributed to the decline.

Micron Technology's stock price took a hit on Thursday, falling as much as 7.9% despite reporting robust earnings. The memory and storage chipmaker's quarterly financial report showed an 82% year-over-year increase in revenue to $6.8 billion, driving adjusted earnings per share (EPS) to $0.62. Analysts had expected revenue of $6.67 billion and adjusted EPS of $0.50.

The company attributed the strong results to an improving balance between supply and demand, which increased pricing power. Additionally, Micron saw a significant boost from 'robust artificial intelligence (AI) demand.' Record sales to data centers jumped more than 50% sequentially, thanks to high-margin AI-related product categories such as high-bandwidth memory, high-capacity dual in-line memory modules, and data center solid-state drives.

However, despite the strong earnings, Micron's stock price fell. This may be due to the company's premium valuation, with the stock selling for roughly 52 times earnings and 126 times forward earnings. Investors may have had unrealistic expectations, hoping for a beat and raise in the company's guidance. While management guided for revenue of $7.6 billion for the upcoming fiscal fourth quarter, which represents 90% year-over-year growth, it came precisely in line with Wall Street's consensus estimates.

Investors should focus on the long-term trajectory of AI, which is increasing, but may come in fits and starts. Micron's strong earnings and guidance demonstrate the company's ability to capitalize on the growing demand for AI-related products.

  Information  Micron Technology is a leading memory and storage chipmaker that has been benefiting from the growing demand for artificial intelligence. The company's products are used in a wide range of applications, including data centers, artificial intelligence, and autonomous vehicles.

   Nvidia, a leader in artificial intelligence computing hardware, has been a key player in the growth of the AI industry. Micron Technology has been working closely with Nvidia to develop high-performance AI-related products.

FAQs:

Q: Why did Micron Technology's stock price fall despite strong earnings?

A: Micron Technology's stock price fell due to the company's premium valuation and conservative guidance, which may have contributed to investors' unrealistic expectations.

Q: What contributed to Micron Technology's strong earnings?

A: Micron Technology's strong earnings were attributed to an improving balance between supply and demand, which increased pricing power, as well as robust artificial intelligence demand.

Q: How does Micron Technology's guidance for the upcoming fiscal fourth quarter compare to Wall Street's consensus estimates?

A: Micron Technology's guidance for the upcoming fiscal fourth quarter came precisely in line with Wall Street's consensus estimates.

Q: Why should investors focus on the long-term trajectory of AI?

A: Investors should focus on the long-term trajectory of AI because it is increasing, but may come in fits and starts.

Q: What is Micron Technology's role in the AI industry?

A: Micron Technology is a leading memory and storage chipmaker that has been benefiting from the growing demand for artificial intelligence. The company's products are used in a wide range of applications, including data centers, artificial intelligence, and autonomous vehicles.

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