As the AI sector continues its explosive growth and companies like Nvidia (NVDA) soar to trillion-dollar valuations, it’s possible that investors are seeing it all as too much of a good thing.
This could explain why despite beating Wall Street’s expectations on revenue and sales in its Q4 and full-year Fiscal 2025 earnings on Tuesday – and providing solid guidance on top of that – shares of Micron Technology (MU) were down more than 2% on Wednesday.
Of course, as companies continue to make massive investments, Wall Street might also be growing concerned – and their outlooks are being tempered – over the risk of the AI sector nearing a bubble, as OpenAI CEO Sam Altman recently predicted.
While Gene Munster, a managing partner at Deepwater Asset Management, said that Micron’s latest guidance shows “this AI train just keeps rolling,” he also notes that Micron’s FY Q1 guidance showing revenue up 43% is below the 46% year–over-year (YoY) gain the company just reported for FY Q4.
And it’s also significantly down from the 80% revenue increase Micron reported in the first quarter last year.
This means the company’s guidance is facing a “huge, difficult comp” when matched up to its recent revenue numbers, Munster said.
Micron’s shares were mostly flat in after-hours trading following its earnings report on Tuesday – despite the earnings being “largely positive,” Munster noted – which could signal that it’s a victim of its own recent success.
“Part of the reason why the positive news is not reflected in the after-hour trading is that the stock has been on an absolute tear,” Munster said. “It’s been up 41% over the past month, and that compares to the Nasdaq that’s been up 5%. And so a lot of this news was priced in.”
Micron’s memory solutions are a growth driver
Although its stock movement might not have reflected it following the earnings, Wall Street wasn’t completely neutral on its performance: 10 of the 15 analysts who cover Micron raised their price targets.
The company’s sales rose 46% to $11.3 billion in fiscal Q4, compared to analyst expectations of about $11.2 billion. Earnings were $3.03 a share, compared to a consensus estimate of $2.84.
Though its revenue came in at $12.5 billion for the quarter, compared to an average estimate of $11.9 billion, Bloomberg notes that some Wall Street analysts were predicting revenue to come in at $13 billion.
In a statement, Sanjay Mehrotra, president and CEO of Micron called the company “the only U.S.-based memory manufacturer,” which makes it “uniquely positioned to capitalize on the AI opportunity ahead.”
And while Elon Musk may doubt that Micron’s high-bandwidth memory (HBM) gives it a competitive advantage in the AI space, Rosenblatt analysts highlighted this part of the semiconductor manufacturer’s business in a client note where they raised their price target to $250 from $200.
The firm is especially bullish on HBM4E, its latest high-bandwidth memory solution.
“What stands out most is Micron’s progress in HBM, including reported HBME leadership, expected HBM4 performance advantages, and the potential for customized HBME solutions,” Rosenblatt wrote. “These innovations could extend the current up-cycle beyond historical precedents.”
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