Micron Technology Stock Severely Impacted by Earnings Report
Micron Technology stock fell more than 6% this week after strong earnings that were offset by high capex costs.
Quick overview
- Micron Technology reported $23.86 billion in earnings for Q2, but their stock dropped 6.6% due to concerns over high capital expenditure spending.
- Despite tripling their revenue from high-performance memory chips, investors are worried about the sustainability of their spending model.
- Analysts suggest the stock drop reflects profit-taking after a strong run, as tech stocks face increased scrutiny.
- Micron's stock has grown 350% over the past year, and buying the dip may be a strategic move for investors.
Micron Technology (MU) posted incredible earnings that would typically ensure a massive stock jump, but their $23.86 billion in earnings for the second quarter netted them a 6.6% stock drop.
Technology stocks took another hit this week as Micron Technology reported excellent earnings but then took a hit on capex (capital expenditure) spending. Their stock is currently down 4% after a small recovery from the previous day’s sharp drop. Their Q2 earnings should have earned them a stock rally, but investors are worried about their spending.
Huge earnings were not sufficient to keep their stock from dropping in an environment where tech stocks are under severe scrutiny. Analysts from Citi say that the downward movement indicates “some profit taking after a strong run.”
Micron Technology Earnings Hurt AI Stock Chances
In the last quarter, Micron Technology tripled their revenue for sales of high performance, high memory chips and semiconductors. They have stepped into the gap created by an unusually high demand for memory supply storage. Their corner of the AI market is very lucrative right now, and their stock grew 350% over the last 12 months.
However, the company is one of many that is facing shareholders and investors who are worried about capex spending. The concern is that Micron Technology and other companies in the AI space are spending millions and sometimes even billions to buy high end components and develop the latest artificial intelligence technology. This is cutting into their profits severely, so even when they make billions, the shareholders want to know how sustainable that model is.
If Micron Technology wanted to dispel false rumors about their capital expenditure, they would release financial statements to that effect. But the information investors have access to online tells them that the company is already planning to spend more than $25 billion in capex.
Investors may still want to buy into this stock, especially since it has seen incredible growth over the last year. Buying the dip now may be a smart move, and Micron Technology has already proven they can multiply their gains from quarter to quarter. They had a very strong quarter, and their guidance for the coming months is well beyond what Wall Street estimates predicted.
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