Micron Technology (MU) stock fell about 3% on Friday, putting it on track to end the week down more than 10% amid concerns over the AI boom and growing competition from Chinese memory-chip maker ChangXin Memory Technologies (CXMT).
CXMT President Dr. Cao Kanyu recently announced a next-generation DDR5 RDIMM, a memory that could be used on servers and data centers, targeted for launch by the end of 2026.
The announcement raised concerns about increased competition in the memory-chip market, sending shares of Micron and other memory-chip makers lower.
However, some Wall Street analysts said the selloff has gone too far.
Rosenblatt analyst calls Micron selloff overblown
Rosenblatt analyst Kevin Cassidy called the recent selloff in memory stocks “overblown,” according to TheFly.
The analyst argued on Thursday that the reaction “overstates the near-term competitive threat and overlooks the structural changes reshaping DRAM demand.”
Rosenblatt reiterated its Buy rating on Micron.
Kent Fung, vice president for market intelligence at Fundstrat, also sees the recent decline as a buying opportunity.
The CXMT-driven selloff is giving investors “another reason to buy the memory dip,” Fung said, according to Barron’s.
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Fung noted that CXMT’s so-called 4F square design could challenge conventional server dynamic random access memory (DRAM), but it does not compete with the high-bandwidth memory (HBM) used in AI servers.
“Investors should consider the possibility that the knee-jerk response to CXMT’s announcement has been a bit of an overreaction,” Fung wrote in a research note.
“While CXMT’s DRAM breakthrough is impressive, it has a weaker association with AI and thus, arguably weaker implications for memory and storage stocks, particularly with regard to their growth potential,” he added.
Even with the recent selloff, Micron stock has surged about 215% year-to-date, benefiting from strong demand for memory chips used in AI infrastructure.
The demand has led to a global supply crunch, pushing memory prices higher.
Some analysts argue that Micron also looks relatively inexpensive compared with some of its semiconductor peers.
According to Investing.com, Micron trades at 11.9 times trailing earnings, compared with 77.8 times for Marvell Technology (MRVL) and 64.4 times for Cadence Design Systems (CDNS).
The lower valuation could give Micron more room to rise if investor sentiment improves.
Micron reports strong earnings as AI demand surges
Micron’s latest earnings showed strong demand for its memory chips.
On Sept. 30, Micron reported better-than-expected fiscal fourth-quarter results as the company continued to benefit from rising AI infrastructure spending.
The company reported adjusted earnings of $33.42 per share, beating analysts’ expectations of $31.61 per share.
Revenue nearly quadrupled to $54.23 billion from $11.32 billion a year earlier, topping analysts’ expectations of $51.07 billion.
Micron also issued a stronger-than-expected forecast for its fiscal first quarter.
The company expects revenue of about $61.5 billion and adjusted earnings of $38.15 per share. Analysts polled by LSEG had expected $57 billion in revenue and adjusted earnings of $35.40 per share.
Micron stock trades at $897 as of writing.
