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Micron’s Shares Drop as Margin Forecast Dampens AI Prospects

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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.

Beijing Supports AI Startup Manus in Bid for Global AI Dominance

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Chinese AI startup Manus has made significant strides, with its China-facing AI assistant now officially registered and receiving notable state media attention, as Beijing continues to promote domestic AI companies. The startup, which recently garnered global attention for releasing what it claims is the world’s first general AI agent capable of making decisions and executing tasks autonomously, is being positioned as a key player in China’s ambition to rival global AI leaders.

Manus’ breakthrough moment came when the company went viral on social media platform X, following the introduction of its AI agent, which offers a more advanced and independent functionality compared to current AI chatbots like ChatGPT and the AI model DeepSeek. Beijing’s state-run CCTV aired a segment showcasing Manus, highlighting the AI agent’s unique capabilities, and comparing it to DeepSeek’s AI chatbot, which also gained recognition for offering competitive performance at a fraction of the cost of its U.S. counterparts.

The Chinese government has supported Manus’ development, with Beijing’s municipal government approving the registration of Manus’ earlier AI assistant, Monica, which is a necessary step for launching generative AI apps in China. This regulatory approval aligns with Beijing’s strategy of bolstering the domestic AI sector while maintaining tight control over content deemed sensitive by the authorities.

In addition to government backing, Manus secured a strategic partnership with the team behind Alibaba’s Qwen AI models, further strengthening its position in the competitive AI landscape. Manus’ AI agent is currently available through an invite-only system, with a waitlist reportedly exceeding 2 million users.

Indian IT Sector’s Fiscal 2026 Outlook Dimmed by Weak US Demand and Trade Tensions

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India’s information technology (IT) sector, one of the worst-performing industries this year, is unlikely to see a strong recovery in fiscal 2026, according to analysts. The outlook remains uncertain, following recent warnings from Accenture, the world’s largest IT services firm, which cited weak discretionary spending and lackluster demand from its clients.

Accenture’s quarterly report flagged that client budgets remained flat, with little growth in discretionary project spending. The company also noted that global trade tensions, exacerbated by new U.S. tariffs, have further dampened prospects in the United States, a key market for Indian IT firms.

Amit Chandra from HDFC Securities noted that the last few months have heightened uncertainty about the first half of fiscal 2026 and how this will affect the overall recovery rate for the year. As of now, India’s IT index has dropped 15.3%, marking its worst performance since June 2022. Major firms such as TCS, Wipro, Infosys, and HCLTech have seen losses ranging from 11.2% to 18.1% this year.

Analysts from Kotak Institutional Equities warned that a soft recovery in demand and fewer mega deals in fiscal 2025 will result in slower revenue growth in fiscal 2026 for Indian IT companies. The impact of early-stage adoption of generative AI is also expected to present challenges, they added.

Research from Citi and Morgan Stanley forecast modest growth, with Citi estimating 4% revenue growth for IT companies in fiscal 2026, similar to fiscal 2025, and Morgan Stanley highlighting subdued client spending as a key factor limiting growth. However, sectors like banking, financial services, insurance (BFSI), and healthcare have shown some signs of recovery, although many clients are currently in a “wait-and-watch mode,” potentially leading to further reductions in spending.

Accenture’s report also indicated that U.S. clients have delayed or canceled new contracts, partly due to the Trump administration’s policies, which could increase competitive pressures in other segments, despite Indian IT companies having limited exposure to these delays.