Micron shares fall after forecast misses high expectations for AI spending

Micron’s fiscal fourth-quarter revenue will be $7.4 billion to $7.8 billion, the company said in a statement Wednesday. While the average analyst estimate was $7.58 billion, some forecasts were above $8 billion. Earnings will be about $1.08 per share, minus certain items, versus a projection of $1.02.

While Micron is getting a boost from the global AI boom, demand is still weak in its traditional markets, such as personal computers and smartphones. These sectors are only beginning to recover from a historic slump last year.

Shares of the Nasdaq-listed company fell about 7 percent in extended trading. Micron was up 67 percent this year before the close, thanks to investor expectations that it will be one of the top beneficiaries of AI spending.

A bare wafer stacker sorts silicon wafers in Building 51 at Micron Technology’s headquarters in Boise, Idaho, on June 10, 2024. Photo: Bloomberg — A bare wafer stacker sorts silicon wafers in Building 51 at Micron Technology headquarters in Boise, Idaho, on June 10, 2024. Photo: Bloomberg

In the third quarter ended May 30, Micron’s revenue rose 82 percent year over year to $6.81 billion. The Boise, Idaho-based company reported earnings of 62 cents per share, excluding certain items. That compares with estimated revenue of $6.67 billion and expected earnings of 50 cents per share.

Micron sells a critical piece of AI hardware – high bandwidth memory chips (HBM). – that works with processors from Nvidia Corp to crunch data. HBM chips can provide information faster, allowing computer systems to develop and execute AI models.

Micron sold $100 million of its new HBM3e chips in the just-completed quarter and predicts that total sales of high-bandwidth products will rise to “several hundred million dollars” in the current period. This will then rise to several billions in the 2025 budget year, which runs until August of that year.

However, ramping up production of HBM chips has been a challenge. The difficulty of increasing factory production — and qualifying the chips to work with computer systems — essentially has a “handbrake” in itself, Manish Bhatia, Micron’s executive vice president of Global Operations, said in an interview.

Micron Technology’s headquarters in Boise, Idaho. Photo: Bloomberg — Micron Technology headquarters in Boise, Idaho. Photo: Bloomberg

In light of these restrictions, Micron expects prices to increase steadily. There is also less chance of the memory market returning to an inventory glut, a problem that has long plagued the industry.

The U.S. company is on track to spend about $8 billion on new plants and equipment in fiscal 2024. That budget will increase significantly next year to support construction of sites in Idaho and New York State.

The Idaho plant won’t start contributing to supplies until fiscal 2027, while the New York facility will come the following year, Micron said. But the timing could depend on Micron’s analysis of supply and demand.

Sanjay Mehrotra, president and chief executive of Micron Technology, speaks to members of the media during a tour of the company’s headquarters in Boise, Idaho, on Monday, June 10, 2024. Photo: Bloomberg — Sanjay Mehrotra, president and CEO of Micron Technology, speaks with members of the media during a tour of the company’s headquarters in Boise, Idaho, on Monday, June 10, 2024. Photo: Bloomberg

In a slide presentation, the company said sales to the PC industry remain on track to increase by a percentage in the low single digits through 2024. Smartphone units will rise in the low to mid single digits range. The company expects AI features to drive demand for smartphones and PCs by 2025.

CEO of Micron Sanjay Mehrotra reiterated the view that 2024 would mark a recovery for the memory chip industry, with record sales in 2025.

Micron competes with South Korea‘S Samsung electronics And SK Hynix in the sale of chips that provide short-term memory in computers and smartphones. They also make flash memory, which provides longer-term storage on those devices.