Memory chip and storage stocks, including Micron Technology, SanDisk, Western Digital, Seagate Technology, and SK Hynix, experienced sharp declines on Thursday. This broad semiconductor selloff was primarily triggered by Taiwan Semiconductor Manufacturing Co.'s (TSMC) quarterly results. Despite TSMC posting record profits, investors reacted negatively to the company's decision to raise its annual capital expenditure guidance to between $60 billion and $64 billion, up from a previous forecast of $52 billion to $56 billion, and its planned $100 billion investment to expand chip manufacturing in Arizona.
US-listed shares of Micron Technology dropped over 4%, SanDisk declined about 8%, Western Digital fell 5%, and Seagate Technology lost more than 5%. US-listed shares of South Korean memory giant SK Hynix slid approximately 8% and are down roughly 30% from recent post-IPO highs. The Philadelphia Semiconductor Index fell more than 2.6%, with AI chipmakers like Nvidia, AMD, and Broadcom also seeing declines of 1.7% to 3%. Analysts indicated that this pullback reflects growing caution regarding the pace of investment in artificial intelligence infrastructure, rather than doubts about AI's long-term potential.
Adding to Micron's challenges, concerns have emerged about potential competition from Chinese memory manufacturer ChangXin Memory Technologies (CXMT). CXMT is reportedly planning to raise approximately $8.5 billion through a listing on Shanghai's STAR Market, almost double its initial fundraising target, implying a valuation of roughly $85.5 billion. Trefis, a research firm, warned that these significant funds could enable CXMT to expand production of commodity DRAM chips, a core business for Micron, potentially leading to future supply gluts and price wars in the notoriously cyclical memory-chip industry.
Despite the selloff, Micron's financial performance remains strong, with revenue increasing 86% year-over-year and net margins reaching a three-year high of 42%. The company has also announced long-term supply agreements with automotive partners such as Qualcomm and Harman, securing future demand for memory and storage components in AI-enabled vehicles. However, Wall Street is not betting against the AI boom itself, but rather on the possibility that memory pricing may have already peaked, and that new capacity could push prices lower, impacting memory stock performance even as the broader AI ecosystem continues to grow.
Shiraz Ahmed, founder and CEO of Sartorial Wealth Inc., commented that the recent rally in semiconductor stocks appears to be cooling. He noted that while AI demand remains intact, its widespread adoption isn't yet sufficient to justify the significant capital expenditure occurring across various industries, including semiconductors and energy. This combination of rising investment costs and high valuations has prompted investors to re-evaluate near-term earnings growth expectations across the sector.
