Investing.com — Stocks of Western Digital Corp (NASDAQ:) fell 4% in response to negative earnings forecasts from industry competitor Micron Technology, which heightened concerns about weakening demand in the semiconductor sector. Similarly, Applied Materials Inc (NASDAQ:AMAT), KLA Corp (NASDAQ:KLAC) and Lam Research Corp (NASDAQ:) saw their shares fall 1.7%, 2.1% and 2.9% respectively in after-hours trading.
The downtrend among chipmaker stocks was triggered by Micron’s forecast of second-quarter revenue and profit falling short of Wall Street’s expectations. The forecast, released Wednesday, pointed to lower prices for memory chips and subdued demand for mobile phones and PCs, which in turn affected the earnings potential of these companies. Micron shares fell 13.6% in after-hours trading, reflecting the market’s reaction to the news.
Boise, Idaho-based Micron generates most of its revenue from DRAM chips, which are currently experiencing market stagnation due to weak consumer demand and oversupply. These chips are a critical component in a variety of computing devices, from data centers to smartphones. The company’s stock has suffered a significant decline, falling more than 30% from its peak in June, amid these market challenges.
Global PC shipments also fell, falling 1.3% in the third quarter of calendar year 2024, as reported by Gartner. Micron CEO Sanjay Mehrotra commented on the slower-than-expected PC refresh cycle and projected flat growth in PC unit volumes for calendar year 2024, slightly below previous forecasts.
Despite these challenges, Mehrotra expressed a positive long-term outlook for the adoption of AI PCs. However, for the immediate second quarter, Micron set its earnings expectations at €1.43 per share, plus or minus 10 cents, which is significantly lower than the analyst consensus of €1.91. The company also expects second-quarter revenue to be around €7.90 billion, plus or minus €200 million, again below the €8.98 billion expected.
The overall issue of weak demand for PCs and smartphones, particularly in significant markets such as China, has led to reduced inventory levels and an oversupply of memory chips. While Micron is expanding its operations with a new mega-campus for DRAM chip manufacturing in upstate New York, and continues to offer NAND flash memory chips for data storage, current market conditions have cast a shadow on the sector, impacting related stocks like Western Digital and others.
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