Micron (MU, Financial) shares nosedived over 17% this morning after the semiconductor giant issued a chilling Q2 FY25 forecast, sparking jitters across the industry. Despite reporting Q1 revenues of $8.71 billion—driven by surging demand for its AI-centric high-bandwidth memory (HBM) chips—the company's Q2 revenue guidance of $7.9 billion fell far short of Wall Street's $8.97 billion target. Analysts flagged the ongoing slump in NAND and DRAM markets, fueled by weak PC and smartphone demand, as the core issue. Micron's gross margin projection of 38.5%, down from 39.5% last quarter, added salt to the wound.
The warning sent shockwaves through global semiconductor stocks, with European chipmakers taking collateral damage. BofA analysts pointed to a troubling combination of excess inventory and intensifying price wars—particularly in consumer markets—as the key culprits. Despite headwinds, Micron's strategic pivot to AI-driven segments like HBM and data center DRAM showed promise, with HBM revenues doubling sequentially. But with consumer demand flatlining and competition from Chinese rivals heating up, the near-term landscape remains precarious.
Micron CEO Sanjay Mehrotra struck a cautiously optimistic tone, emphasizing the company's long-term positioning. Mehrotra noted that although the consumer markets remain soft, but its focus on AI-centric products is yielding strong results as Micron continues to capture market share in high-margin segments. The challenge now? Balancing robust AI-driven growth with sagging demand in legacy markets. Investors are holding their breath, watching closely to see if Micron's bet on cutting-edge innovation will outweigh the weight of a struggling consumer electronics market.
