Micron stock rebounds as AI demand supports memory outlook amid volatility

Micron Technology MU shares rose on Wednesday as strong results from SpaceX and an upbeat outlook from Super Micro Computer helped revive investor interest in artificial intelligence-related stocks, offering some relief after a difficult month for the memory chipmaker.

Micron shares gained around 2% during Wednesday’s trading.

The stock had fallen 16% in October through Tuesday’s close and was down 26% from its June peak, despite more than tripling in value this year.

Super Micro raised its fiscal first-quarter revenue guidance to between $18.5 billion and $19.5 billion, from a previous range of $14.5 billion to $15.5 billion.

SpaceX also reported strong quarterly results and indicated plans to spend as much as $40 billion in the fourth quarter.

The developments helped ease concerns about the sustainability of AI spending, although investors remain focused on memory demand, pricing, supply growth and financing risks across the sector.

AI demand and memory pricing remain key drivers

Micron’s recent share-price weakness reflects broader concerns about whether the rapid expansion of AI infrastructure can be sustained.

Analysts have warned that memory manufacturers could face pressure if demand slows, as lower purchasing volumes could also weaken pricing.

Wedbush analyst Matt Bryson told MarketWatch that memory is more exposed to a slowdown than some other components because weaker demand can affect both volumes and prices.

Memory manufacturers have benefited from strong demand that has supported higher prices, but customers may become less willing to pay those prices if market conditions deteriorate.

However, Bryson said he saw no clear signs of slowing demand, although he expected the memory trade to remain volatile.

He also noted that the expansion of AI applications would require additional memory capacity to support computing workloads.

Stifel analyst Brian Chin told MarketWatch that concerns about a potential downturn in memory demand might be premature.

While some investors are focused on a possible negative shift within two quarters, Chin suggested that strong market conditions could persist for another two to three years.

Valuation and supply constraints shape outlook

Micron’s valuation has become another point of discussion during the recent pullback. Chin estimated that the stock was trading at around five times his forecast forward earnings per share, but he was sceptical that investors would assign the company a higher valuation multiple.

He argued that the relatively low valuation could provide some downside protection if earnings continued to increase gradually.

Ryuta Makino, an analyst at Gabelli Funds, told MarketWatch that Micron compared favourably with storage stocks on valuation.

However, he also warned that mounting debt across the AI ecosystem could weigh on the company.

Some AI laboratories and newer cloud providers are experiencing negative free cash flow, while rising memory prices are increasing data-centre server costs.

Makino said this could intensify financing risks, even as he expected memory supply and demand conditions to tighten further into 2027 and 2028.

Supply growth is another consideration.

Micron and its competitors have plans to expand capacity, potentially putting pressure on memory prices if production increases too quickly.

Chin said difficulties faced by semiconductor equipment makers in ramping up chip-fabrication tools could constrain the pace of additional supply.

Micron reaches Taiwan labour agreement

Separately, Micron’s Taiwan unit and a union representing workers at its Taichung operations reached a labour agreement, prompting both sides to withdraw from mediation scheduled for October 22.

The agreement covers several issues, but its terms have not been disclosed.

The company and union said they would share details with affected employees in the coming days.

The development comes as a separate union representing workers at Micron’s Taoyuan operations plans a one-day warning strike on Wednesday over bonuses and profit-sharing.

Mediation between the company and that union ended without an agreement in September.

Both unions have sought a permanent profit-sharing scheme that would allocate 15% of Micron’s operating profit to quarterly bonuses.

The company employs approximately 15,000 people in Taiwan, where it produces memory chips used in AI servers and other devices.

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