Key Takeaways:
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- Micron reported better-than-expected earnings, with high-bandwidth memory (HBM) chip sales surpassing $1 billion in Q2, up 50% sequentially.
- The company raised its 2025 forecast for the HBM market to $35 billion, driven by strong AI demand and Nvidia’s reliance on these chips.
- Despite strong growth in HBM, Micron’s guidance for lower gross margins in Q3 (36.5% vs. 37.9% in Q2) overshadowed the positive results, leading to a 7% drop in stock price.
- Analysts remain optimistic about Micron’s long-term growth, with price targets raised to $130, citing AI-driven demand and technology leadership in HBM.
What Happened?
Micron Technology’s stock fell 7% on Friday despite reporting strong fiscal Q2 earnings that exceeded expectations. The company highlighted robust growth in its high-bandwidth memory (HBM) chips, which are critical for AI processors like those from Nvidia. HBM sales surpassed $1 billion in the quarter, growing 50% sequentially, and Micron raised its 2025 market forecast for HBM chips to $35 billion, up from $20 billion.
However, the company’s guidance for lower gross margins in Q3, falling to 36.5% from 37.9% in Q2, dampened investor sentiment. Analysts attributed this margin pressure to Micron’s NAND business, where the company is selling more bits into lower-margin consumer markets to clear inventory.
Why It Matters?
Micron’s strong performance in HBM chips underscores its critical role in the AI hardware ecosystem, with demand driven by Nvidia and other AI processor manufacturers. This positions Micron as a key player in the rapidly growing AI market, which is expected to sustain long-term growth.
However, the margin pressure from its NAND business highlights the cyclical challenges in its core markets, such as PCs, mobile phones, and data centers. Investors are concerned about whether HBM growth can fully offset these weaknesses.
For investors, the stock’s decline reflects short-term concerns over profitability, but analysts remain bullish on Micron’s long-term prospects, citing its technology leadership and the sustained demand for AI-related memory products.
What’s Next?
Micron’s ability to navigate cyclical weaknesses in its DRAM and NAND businesses will be critical in the coming quarters. Investors should watch for improvements in gross margins and further updates on HBM sales, which are sold out for 2025.
The broader AI market’s growth trajectory will also play a key role in Micron’s performance, as demand for HBM chips is expected to remain strong through 2026. Analysts, including Wedbush and UBS, have maintained their bullish outlook, with price targets of $130, signaling confidence in Micron’s long-term growth potential.
