Shares of Micron Technology fell about 5% on Thursday, even after the chipmaker reported stronger-than-expected fiscal second-quarter results.
The company nearly tripled its revenue in the latest quarter, driven by robust demand for memory chips used in artificial intelligence systems.
Heavy spending plans weigh on sentiment
Investor reaction was tempered by Micron’s outlook for significantly higher capital expenditures.
The company said it expects capital spending to exceed $25 billion in the current fiscal year, which runs through August, above analyst estimates of $22.4 billion.
It also projected that fiscal 2027 capex will increase by more than $10 billion from the prior year.
Chief Executive Officer Sanjay Mehrotra said, “We project our fiscal 2027 capex to step up meaningfully,” underscoring the scale of investment required to meet rising demand.
The elevated spending reflects the cost of expanding production capacity, particularly for high-bandwidth memory (HBM), which is critical for AI workloads.
Micron’s strong performance is closely tied to surging demand for AI infrastructure, particularly chips used alongside systems from Nvidia.
High-bandwidth memory plays a key role in training and running AI models, enabling faster data transfer. As demand has surged, memory prices have risen sharply due to supply shortages.
Producers, including Micron, have increasingly prioritised HBM production, which offers higher margins, while the supply of other memory types has tightened — further pushing up prices.
Micron’s outlook far ahead of expectations
Micron’s forward guidance also exceeded Wall Street expectations by a wide margin.
The company forecast fiscal third-quarter revenue of approximately $33.5 billion, compared with analyst estimates of $23.7 billion.
It also projected adjusted earnings of about $19.15 per share, well above the consensus estimate of $11.29.
Despite the strong outlook, the stock reaction remained muted, reflecting elevated investor expectations following a prolonged rally.
Analysts cite profit-taking, valuation concerns
Analysts attributed the share price decline to a mix of profit-taking and concerns about sustainability.
Citi analysts said the move likely reflected “some profit taking after a strong run” and maintained a Buy rating on the stock.
They noted that a key debate among investors is whether Micron can continue to benefit from rising DRAM prices, similar to past cycles.
Meanwhile, Goldman Sachs said the stock could remain range-bound in the near term, citing already high expectations.
The firm maintained a Neutral rating and flagged the risk of slowing high-bandwidth memory pricing momentum in 2027 as additional supply comes online.
Despite near-term caution, several analysts raised their price targets following the earnings report.
Wells Fargo increased its target to $550 from $470, while Barclays raised its forecast to $670 from $450, reflecting confidence in Micron’s long-term growth trajectory.
Going forward, the trajectory of memory prices and the pace of capacity expansion will be key factors in determining whether Micron’s rally can be sustained.
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