Micron is experiencing the biggest drop since 2020!

U.S. memory chip maker Micron Technology Inc. is facing its biggest drop in stock value in four years. The reason is the weak earnings outlook, which is affected by falling demand for smartphones and personal computers. While demand for artificial intelligence chips is growing, major market segments are bringing complications for the company.

Micron $MU expects its second-quarter fiscal year revenue to be approximately $7.9 billion, well below the average analyst forecast of $8.99 billion. Net income per share, adjusted for certain items, is estimated to be a maximum of $1.53, below expectations of $1.92.

The main reason for the weak results is low demand for chips for smartphones and personal computers. These segments together account for the majority of Micron's production volume. While data center revenue was up 400% from last year and now accounts for more than half of total revenue, it was unable to offset declines in traditional markets.

The company's stock, which had gained 22% this year (through Wednesday), was down 15% in Thursday's premarket. If this decline holds, it will be its biggest one-day loss since March 2020.

"Although consumer-oriented markets are weaker in the short term, we expect a return to growth in the second half of our fiscal," said Sanjay Mehrotra, the company's chief executive officer.

In the first quarter ended Nov. 28, the company's revenue rose 84% to $8.71 billion, with net income per share of $1.79, beating analysts' expectations. Still, the slowdown in the mobile devices segment remains a concern, which saw a 19% drop in sales compared to the previous quarter.

The company also pointed to inventory reductions at its customers, which affected current demand. "We are now seeing a more pronounced impact from our customers' inventory reductions," the company said in a presentation to investors. Micron said the situation should stabilize by spring.

Outlook:

Micron believes the personal computer market will recover slightly through 2025, with 5% growth expected, particularly in the second half of this year. In contrast, demand for mobile and automotive chips remains subdued for the time being.

The company plans to invest $14 billion in building new plants and facilities, a sum that includes curtailing spending on memory chips for data storage. Memory chip makers, including South Korean rivals SK Hynix and Samsung, are trying to avoid earlier problems with excess inventory by slowing production capacity ramp-ups.

Micron continues to rely on innovative technologies, such as high-speed memory used in artificial intelligence systems, to enable higher margins. Nevertheless, much of the market remains sensitive to fluctuations in demand and prices, bringing uncertainty in the periods ahead.

Micron's DRAM and NAND flash memory chips remain key components for a wide range of devices, from data centres to smartphones. But the company faces challenges in maintaining stability in a rapidly changing technology industry.

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Source: Yahoo, CNN.