Should You Buy the Dip on Micron?
Key Points
Micron's latest earnings exceeded expectations with revenue reaching nearly $24 billion.
Micron now expects capital expenditures of at least $25 billion.
Increased competition, heavy spending, and Google's TurboQuant all negatively impacted Micron's stock price recently.
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Micron Technology (NASDAQ: MU) hit an all-time high of $471 on March 18. Since then, the stock has been in a free-fall, trading $90 lower just a week later. The 20% drop from the peak presents an interesting question for investors. Should you buy the dip or accept that demand for memory might actually have a ceiling?
Micron's latest quarterly earnings were extraordinary to say the least. For the second quarter of fiscal 2026, Micron reported revenue of $23.9 billion. This figure represents a 75% increase quarter over quarter and a 196% increase year over year.
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So why are investors selling? There are three reasons investors are questioning Micron's long-term prospects. First, there's increased competition in the high-bandwidth memory (HBM) market.
Image source: Getty Images.
Next, Micron increased its capital expenditures to exceed $25 billion. This budget is about $5 billion higher than its previous guidance. Heavy spending is likely good for the long term, but will negatively impact short-term cash flow.
Lastly, Alphabet's (NASDAQ: GOOGL) (NASDAQ: GOOG) Google released the TurboQuant AI model compression model, which claims to reduce memory requirements significantly. This news from Google is rattling memory stocks across the industry.
Even with these headwinds, Micron is still a compelling stock. The company has completely sold out of memory through 2026. Micron is still expecting substantial increases in revenue and gross margins in the coming quarters, and it just signed its first five-year strategic customer agreement (SCA).
This dip from the all-time high looks more like an opportunity than a red flag at this point. Micron has massive demand and market share that'll be difficult to beat in the next few years. The sell-off is overblown.
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Micron Technology. The Motley Fool has a disclosure policy.
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