Dec 19 (Reuters) – Shares of Micron Technology tumbled 15% in premarket trading on Thursday after a gloomy forecast that pointed to pressure from weak demand for personal computers and smartphones, fueling a solid rise in sales of AI-related chips were overshadowed.
The market for dynamic random access memory (DRAM) chips, the company’s biggest revenue generator, has been under pressure since the end of the pandemic amid a persistent supply glut.
Morgan Stanley analysts said the DRAM market appears unhealthy and is slowly deteriorating, with the greatest weakness in older technologies, which generally indicates oversupply.
Micron expects low-single-digit smartphone growth through 2025. Global PC sales fell 1.3% to 62.9 million units in the third quarter, according to research firm Gartner.
Meanwhile, revenue from the company’s high-bandwidth memory (HBM) chips, a type of DRAM chip used to power advanced AI systems, has more than doubled sequentially.
“Micron’s HBM story remains intact as the company has positioned itself to take advantage of market expansion opportunities through data center investments through 2025,” Piper Sandler analysts said.
The Boise, Idaho-based company is just one of three HBM chip suppliers alongside South Korea’s SK Hynix and Samsung.
Demand for HBM chips has driven Micron’s shares up about 22% so far this year, and analysts expect it to remain a key driver.
At least six brokerages cut their price targets on the stock after the results, according to LSEG.
Micron’s twelve-month price-to-earnings ratio is 10.67, lower than Qualcomm (13.4) and Advanced Micro Devices (23.97).
(Reporting by Joel Jose in Bengaluru; Editing by Sriraj Kalluvila)
