Micron Technology’s shares dropped 8% on Friday after the company issued a disappointing margin forecast, overshadowing strong quarterly revenue expectations driven by growing demand for its semiconductors used in artificial intelligence applications.
Despite being one of only three major suppliers of high-bandwidth memory (HBM) chips for data-heavy AI tasks, Micron’s forecast for adjusted gross margin fell below expectations. The company cited lower pricing for consumer memory chips, particularly NAND flash, as a key factor affecting profitability. NAND flash memory chips, used in products like smartphones and personal computers, remain in oversupply due to aggressive buying during the pandemic, which has led to weak pricing.
Micron projected a third-quarter adjusted gross margin of around 36.5%, slightly below analysts’ forecast of 36.9%. This would represent a 3 percentage-point drop from the previous quarter. The company’s chief business officer, Sumit Sadana, acknowledged the ongoing challenges in the NAND market, with the oversupply continuing to put pressure on margins. Micron has also been reducing NAND production, which has led to underutilization and higher fixed costs per unit.
However, the company’s prospects in AI remain strong, with a forecasted revenue boost driven by high demand for its HBM chips, particularly from key players like Nvidia. Morningstar analysts highlighted HBM as a key growth driver for Micron, with AI and data center demand expected to continue.
