Micron Technology, a leader in memory and storage solutions, recently reported the most profitable quarter in its corporate history. The company’s revenue and earnings significantly surpassed even the most optimistic Wall Street projections. Paradoxically, investors have been offloading the stock in substantial volumes. This sudden shift in sentiment is attributed to a new software innovation from Google, which has the potential to dramatically reduce the AI industry’s massive appetite for hardware.
A Fundamental Shift Overshadows Strong Results
The company’s stellar fundamentals have been completely eclipsed by this technological development. For its fiscal second quarter, Micron nearly tripled its revenue to $23.9 billion. Adjusted earnings per share surged to $12.20. During the earnings presentation, management emphasized that it can only meet between 50% and two-thirds of medium-term customer demand. Despite this, the stock has declined for six consecutive trading sessions. In the past week alone, the share price has retreated by over 20%, currently trading at approximately 308 euros.
The catalyst for the sell-off is Alphabet’s introduction of “TurboQuant,” a new compression method. This software aims to reduce the memory requirements for large language models by a factor of six. Google also claims it can increase computational speed by up to eight times on Nvidia’s H100 GPUs. The prospect of such massive efficiency gains from software alone poses a significant challenge to memory chip manufacturers, as advanced algorithms could potentially substitute for costly hardware upgrades in the future.
Should investors sell immediately? Or is it worth buying Micron?
Market Divergence: Structural Threat or Buying Opportunity?
Not all market observers interpret Google’s software as a long-term threat to chipmakers’ business models. Analysts point out that TurboQuant primarily targets inference memory, which is used to run already-trained AI models. The initial training of these models continues to demand enormous memory capacity. Morgan Stanley analysts view the recent price decline as a potential entry point, noting that the integration of such software solutions into existing systems historically requires considerable time.
However, the investment bank recently downgraded Micron from its top semiconductor pick, reinstating Nvidia to that leading position. Following the extreme rally in recent months, market concerns are growing that profit growth may be nearing a peak as industry capacity expansions reach their limits.
Amid the current volatility, Micron’s management reaffirmed its shareholder-friendly policy by raising the quarterly dividend from $0.12 to $0.15 per share. The long-term industry landscape remains tight. Competitor SK Hynix of South Korea estimates that supply will continue to lag behind demand by roughly 20% until 2030. Concrete data on the real-world performance of the new compression method will be presented by Google next month at the ICLR AI conference in Brazil.
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