Investors may have just seen the canary in the semiconductor coal mine fly by. Although Micron (MU) has not had Nvidia's meteoric performance, it has been a stellar stock, doubling in the last year and up over 50% in 2024. The AI boom has buoyed memory chips higher as these chips have become a more important component for artificial intelligence accelerators.
However, the possibly unrealistic bar now being set for AI earnings reports saw Micron drop more than 7% on high volume. I want to express a short-term bearish view in Micron as I believe further profit-taking will occur in the third quarter. Micron is one of the largest semiconductor companies in the world, specializing in high-bandwidth memory and storage chips.
Yet it is a fraction of the size of $3 trillion Nvidia at nearly $150 billion in market cap. Shares of Micron fell on Thursday afternoon despite receiving several price targets increases from a variety of brokerage firms. JPMorgan is one of the many bullish firms on Micron, calling the company one of its top picks for the semiconductor space.
The reason that Micron saw a precipitous drop in stock price was due to the just revealed plans to increase their capital expenditures (CapEx) in the next fiscal year as the semiconductor major is expecting and preparing for substantial growth in revenue. In fiscal 2024, Micron spent $8 billion in CapEx. Micron's guidance insinuated that 2025 CapEx will be roughly $13B, that would be a 62.
5% increase. That was the catalyst.
