Micron's Selloff Highlights the Risk of Sky-High AI Expectations

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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.

Micron is among the 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.

A big jump in market value appears vulnerable to a quick correction, as Nvidia showed earlier this week when its 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. The Taiwanese semiconductor manufacturing company, which makes some of Nvidia's most valuable chips and is considered critical to AI, has fallen more than 2% since a June 19 peak.

Micron's news comes after two of South Korea's largest companies, memory makers Samsung Electronics Co. and SK Hynix Inc. I also led the decline, although they recovered their losses on Thursday. For businesses whose traditional output of PCs, smartphones and memory supplies for more traditional data center use is still recovering from last year's decline, that means uncertainty in share prices. has a large range.

Tom Kong, director of Counterpoint Research, said the US chipmaker's briefing fell short of what SK Hanks 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 enjoys or Samsung's lead in the broader memory industry.

“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 and Tan Hween.

(Updates with share performance)

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