Why Micron Stock Just Dropped
Key Points
South Korea's government just floated the idea of taxing excess corporate AI profits.
The idea is not popular yet in Korea, but it might spread.
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"I'm from the government, and I'm here to help."
This punchline to the Reagan-era joke, "What are the nine most terrifying words in the English language?", is gaining currency today on fears that global governments will impose windfall profits taxes on AI companies.
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Micron (NASDAQ: MU) stock is suffering in response, its shares down 3.8% through 10:10 a.m. on worries government may kill the golden AI goose.
Image source: Getty Images.
What Korea just did to Micron
As The Korea Herald reports: Presidential chief of staff Kim Yong-beom proposed on Facebook today that South Korea levy a special tax on AI companies to fund a "national dividend," and ensure that "excess profits in the AI era are [not] concentrated," but widely shared by Korean citizens.
This is just a Facebook post at this point -- not official Korean policy. It's also sparked criticism in Korea, with opponents calling the proposed tax "dangerous and irresponsible" and even demanding that President Lee Jae Myung "immediately dismiss" Kim.
And yet, the incident highlights a risk: It's not just Micron's competitors the company must worry about, being attracted by high profit margins on computer memory chips and offering competing products at lower prices, in an attempt to win market share from Micron.
Now Micron has to worry about governments like Korea's wanting a piece of those profits as well.
What is the real risk for Micron?
Admittedly, the risk to Micron stock seems low right now. Micron's an American company, for one thing, and does not manufacture chips in Korea. Investors' greater worry is that Korea's idea may catch on in countries where Micron does operate. (China, for example -- or even the U.S.)
We've seen proposals like this before, such as when Bitcoin profits drove discussion of how to tax cryptocurrency. AI profits and Micron could be next.
Should you buy stock in Micron Technology right now?
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Rich Smith 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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