Micron Falls 22% After AI Rally, Sparks Valuation Debate

Micron Technology shares dropped roughly 22% on Monday, sliding from an all-time high near $1,255 to about $985 after a rapid rally tied to AI demand for memory chips.

The decline occurred alongside a broader pullback in AI hardware and memory stocks following a steep run-up earlier this year. Investors reacted to a reported plan by a major cloud company to build a third-party AI compute business; market participants interpreted that plan as a possible source of future excess capacity among hyperscalers.

Traders also booked profits after large gains, and hedge funds reduced exposure to technology hardware ahead of earnings season. Goldman Sachs reported that U.S. hedge funds had sold tech hardware stocks for a fourth straight week.

Micron’s latest quarter showed record results. The company reported fiscal third-quarter revenue of $41.5 billion, up from $23.9 billion in the prior quarter and $9.3 billion a year earlier. Non-GAAP net income was $28.9 billion, or $25.11 per diluted share, and operating cash flow reached $25.4 billion.

Even after Monday’s decline, Micron shares remain more than 250% higher year to date.

Several analysts have raised price targets in recent months. Bank of America analyst Vivek Arya increased his target to $1,500 from $950 while maintaining a Buy rating, citing limited memory supply and constraints on related components. Citi analyst Atif Malik raised his target to $1,200 in June, referencing stronger-than-expected memory pricing and solid data-center demand. UBS analyst Nicolas Gaudois kept a $1,625 target and described the pullback as an entry point based on ongoing industry tightness.

There are opposing market positions. Investor Michael Burry has reportedly taken a short position against Micron, questioning whether the recent advance reflects durable fundamentals. At the same time, Samsung Electronics and SK Hynix have announced plans for a combined $2.1 trillion in long-term investment, which market observers say could add capacity over time.

Market participants continue to weigh near-term demand from data centers and AI projects against the potential for increased industry investment and future capacity. The stock’s volatility followed substantial gains earlier in the year and coincided with shifts in hedge-fund flows and investor profit-taking.