Micron's sale of sky-high AI expectations shows risk.

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(Bloomberg) — Micron Technology Inc.'s post-results sell-off sent global investors a fresh reminder of the risks involved in betting on artificial intelligence chipmakers.

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Leading AI chipmaker Nvidia Corp. Shares of Micron fell nearly 8% in extended trading after the memory maker's forecast fell short of the highest estimates, days after it lost nearly half a trillion dollars. In a sign of extreme volatility in AI-related stocks, Micron's news pushed South Korea's two biggest companies, Samsung Electronics Co. and SK Hynix Inc. It also led to shortages, as fellow memory chip suppliers feed the AI ​​supply chain.

Micron is one of many companies that have benefited from the frenzy for AI-related stocks, as its high-bandwidth memory is a candidate for training large language models alongside Nvidia's industry-leading chips. Its shares had doubled in the year before Wednesday's report, but — even with an outlook in line with the average of analyst estimates — the company was penalized for falling short of high expectations.

“The market is completely set on unrealistic expectations, as many names that have been beating Street estimates by large margins are still selling,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors Pte in Singapore. happening.” “But I think the street is very well aware of the fact that these American names are very ripe. There are a lot of paper hands chasing easy money fast.

The global AI frenzy gained momentum earlier this week when Nvidia shares entered correction territory before bouncing back on Monday. Shares of a global gauge-tracking semiconductor have fallen about 5% since hitting an all-time high earlier this month.

For businesses like Micron, whose traditional output of memory supplies for PCs, smartphones and more traditional data center uses is still recovering from last year's declines, that means share prices are on the upswing. A great degree of uncertainty.

Tom Kong, director of Counterpoint Research, said the U.S. memory maker's briefing fell short of what SK Hynix had previously offered, when it announced that its HBM production capacity would be largely sold by 2025. He added that Micron lacks the dominant position in AI memory that SK Hynix has or in the broader memory industry that Samsung has.

“It's a reality check in the AI ​​sector, which seems bubbly,” Kang said.

A relentless rally in US megacaps seen as benefiting from AI has pushed their shares to historic highs. Micron's share price is expected to sell for 4.5 times over the next 12 months, compared to an average of 2.2 times over the past 10 years.

–With help from Abhishek Vishnui.

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