Is Micron Stock a Sell After This Weekend's Negative AI News?
Key Points
This followed news that a top AI developer was suspending training for some of its models.
There have been numerous incidents of rogue AI activity lately.
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Hardly for the first time recently, the artificial intelligence (AI) industry poured cold water on Micron Technology (NASDAQ: MU) stock Monday. Investors traded out of it following news that ChatGPT developer OpenAI is hitting the pause button on training several of its AI models.
Since Micron, which specializes in crucial hardware (specifically memory and storage) necessary to fuel the current build-out of AI compute, it's vulnerable to such developments. So perhaps the Monday sell-off is a portent of further stock price declines to come.
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Fear was the driver
A significant, largely AI-fueled run-up in Micron's share price -- which has more than tripled year-to-date -- has put it at vertigo-inducing levels. As such, even a minor indication that the AI revolution is slowing leaves it exposed to bursts of bearishness.
Image source: Getty Images.
Unlike other stocks that have been hit by hype, though, Micron has some powerful fundamentals that more than justify the steep rise of its equity.
In its most recently reported quarter, the company's revenue jumped more than four times higher year-over-year to $41 billion. As if that wasn't hot enough, net income not under generally accepted accounting principles (non-GAAP, or adjusted) leaped stratospherically to almost $29 billion from barely over $2 billion in the year-ago period.
Rogue ones
The rapid growth in AI development has raised concerns that advanced agentic models could go "rogue" and wreak significant destruction. It's important to bear in mind, though, that OpenAI's halt is planned to be only temporary; the developer added that it will resume training on those models once tighter monitoring and containment protocols are established.
So its pause is far from a permanent cessation. I think other cautious developers will follow suit, as the advance of AI compute is far too high-stakes to abandon completely. And with that, I predict that Micron's stock price will recover.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
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