Micron Technology, one of the world's largest memory-chip makers, saw its shares drop 13% on Friday following a revenue forecast that disappointed Wall Street. The company projected fiscal second-quarter revenue of around $7.9bn, below analyst estimates of $8.9bn, citing sluggish demand for memory chips used in PCs and smartphones.
The decline rippled through the semiconductor sector, with peers such as Nvidia and AMD also falling 3% and 2% respectively. The Philadelphia Semiconductor Index, a key benchmark for chip stocks, lost 2.7% on the day. Analysts at several investment banks downgraded their price targets for Micron, noting that inventory correction in the memory market may persist longer than previously expected.
For UK investors, the immediate impact is felt through pension funds and index-tracking exchange-traded funds (ETFs) that hold significant positions in US technology stocks. The FTSE 100 was relatively insulated on Friday, edging down just 0.2%, but the tech-heavy Nasdaq Composite fell 1.8%. 'The chip cycle is turning, but the timing remains uncertain,' said a senior analyst at a London-based wealth manager. 'UK holders of global equity funds should brace for continued volatility in the tech space.'
Background: Micron has been a bellwether for the semiconductor industry, which is cyclical by nature. After a post-pandemic boom, demand for memory chips has cooled as businesses and consumers cut back on spending. The company's results are often seen as a proxy for broader tech health, making Friday's drop a worrying signal for the sector heading into 2025.
Looking ahead, investors will watch for commentary from Micron's management during the next earnings call, as well as data on PC and smartphone shipments. A sustained downturn could weigh on UK-listed tech firms and suppliers, though some analysts argue the sell-off may present a buying opportunity for long-term portfolios.
Source: Reuters, Bloomberg