Why Micron Stock Dove Today
Key Points
Micron stock slumped after competitor Sandisk delivered surging growth.
Its outlook made it clear that the unprecedented demand for memory chips will continue, but that wasn't enough to ease investor concerns.
The stock remains attractively priced.
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Shares of Micron (NASDAQ:MU) stumbled out of the gate Friday morning, falling as much as 5.9%. As of 11:28 a.m. ET, the stock was still down 4.7%.
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The catalyst that sent the semiconductor specialist lower was a competitor's bullish financial report, which wasn't enough to ease investor concerns about the future of artificial intelligence (AI).
Image source: The Motley Fool.
You want chips with that?
Rival memory chipmaker Sandisk (NASDAQ:SNDK) released its financial results, which were by all accounts bullish. For its fiscal 2027 first quarter (ended Oct. 2), the company delivered revenue that soared 378% year over year and 23% quarter over quarter to $11 billion. This fueled adjusted earnings per share (EPS) of $49.51, which grew more than 40-fold.
For context, analysts' consensus estimates were for revenue of $10.7 billion and adjusted EPS of $46.67, so the company cleared both hurdles by a wide margin.
Unrelenting demand for the memory chips that underpin AI continued. Data center revenue was the highlight, surging 1,682% year over year to $4.8 billion, while edge computing revenue of $5.8 billion jumped 320%.
Sandisk even provided a robust second-quarter forecast that surpassed Wall Street's expectations, guiding for revenue of $12.4 billion and adjusted gross margin of 85%, both at the midpoint of its guidance.
On the heels of its stellar financial report, Sandisk stock plunged as much as 11% on Friday, dragging other memory chipmakers down with it.
So what does this have to do with Micron?
The reason for the stalling stock prices is complex. Sandisk and Micron stocks have gained 488% and 293%, respectively, over the past year, driven higher by surging demand for the memory chips used for AI. After runs of this magnitude, investors are increasingly concerned that the good times can't last -- particularly when it comes to AI.
Moreover, the Big Three memory chipmakers -- Sandisk, Micron, and SK Hynix -- tend to move together, and that phenomenon held true today.
Finally, Micron stock is selling for just 12 times earnings. For investors who believe that AI still has room to run, this represents an attractive buying opportunity.
Should you buy stock in Micron Technology right now?
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Danny Vena, CPA has positions in Micron Technology and Sandisk. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
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