Why artificial intelligence (AI) stock Micron Technologies stumbled on Thursday

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Not quite as good as expected.

Shares of Micron Technology (MU -7.12%) fell on Thursday, falling as much as 7.9 percent. By 3:15 pm ET, that had recovered somewhat, though the stock was still down 5.9%.

The catalyst that sent the memory and storage chipmaker lower was the company's quarterly financial report.

Strong results

For its fiscal 2024 third quarter (ending May 30), Micron generated revenue that grew 82% year-over-year to $6.8 billion, with adjusted earnings per share (EPS) of $0.62. , compared to a loss of $1.43 in the year-ago quarter.

Analyst consensus estimates were calling for revenue of $6.67 billion and adjusted EPS of $0.50, so Micron easily cleared both benchmarks.

The company noted that the balance between supply and demand continued to improve, which helped increase pricing power. Results were also boosted by “strong artificial intelligence (AI) demand”. Record sales at data centers grew by more than 50 percent Sequentially Thanks to high-margin AI-related product categories, including high-bandwidth memory, high-capacity dual-inline memory modules, and data center solid-state drives.

It looks good, so why is the stock down?

Since AI went viral earlier last year, AI-related stocks have been commanding a premium to their historical valuations, and Micron is no different. This is thanks to the baked-in expectations of further gains to come. Unfortunately, timing is sometimes difficult to predict, at least with any accuracy, and that's what's weighing on stocks today.

For the fourth quarter of the upcoming fiscal year, management is guiding for revenue of $7.6 billion, which would represent 90% year-over-year growth. While that's certainly an enviable forecast, it's right in line with Wall Street's consensus estimates, while investors were hoping for a breakthrough. And pick on

Micron currently sells for about 52 times earnings and 126 times forward earnings, so investors had high — if not unrealistic — expectations going into the company's report. A quarter does not make a year, and management was likely conservative. It's important to remember that while AI is gaining momentum, demand will come in fits and starts.

Additionally, 90% year-over-year growth is nothing to sneeze at, so investors should focus on the long term and ignore today's stock price movements.

Danny Veena has no position in any stocks. The Motley Fool has no positions in any of the stocks mentioned. The Motley Fool has a Disclosure Policy.

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