On March 17, after an overall market correction, Micron Technology's share price has gradually stabilized recently. It rose more than 6% in a single day last Friday, but its share price still hovers below the annual average of US$107.82, compared with its high at the end of 2024. It fell by more than 15%.Behind this volatility, investors are focusing on the company's upcoming second-quarter fiscal 2025 financial results and future guidance.Although Wall Street has optimistic expectations for HBM (high-bandwidth memory) and enterprise-level NAND storage businesses driven by AI computing power demand, the continued weakness of the consumer electronics market and the complexity of industry inventory adjustments still cast a shadow on Micron's recovery path.

Differentiation of performance expectations: Can the increase in AI hedge against the collapse of the consumer market?

In its fiscal second-quarter results forecast released in December 2024, Micron lowered its revenue forecast to US$7.9 billion, more than US$1 billion lower than the analyst consensus of US$8.99 billion, while the expected earnings per share (EPS) ceiling of US$1.53 is also lower than the market expectation of US$1.92.This "explosion" directly caused the stock price to plummet by more than 16% after hours, and triggered a downgrade of ratings by Bank of America Merrill Lynch and other institutions.The core contradiction is that although data center business revenue increased by 400% year-on-year, HBM revenue doubled month-on-month and contributed more than 50% of total revenue for the first time, weak demand in the smartphone and PC markets led to a sharp drop in mobile business revenue by 19% month-on-month. Sales in the automotive and industrial sectors also fell simultaneously.This structural imbalance highlights the cyclical dilemma of the memory chip industry: even in the midst of the explosion of AI computing power, the DRAM market, where consumer electronics accounts for more than 70% of the supply and demand mismatch, is still difficult to escape the constraints of supply and demand mismatch.

HBM: Storage giant's "life-saving straw" and hidden competition

Driven by AI servers 'rigid demand for high-performance storage, HBM has become a key bargaining chip for Micron to break through.Currently, the DRAM usage of a single AI server can reach 8 times that of an ordinary server, and the NAND usage is also 3 times that of an ordinary server.Micron predicts that the global HBM market will exceed US$30 billion in 2025 and may reach US$100 billion in 2030.Its HBM3E products have been introduced into the NVIDIA H200 and Blackwell system supply chains, and plans to further consolidate performance and cost advantages through technology iterations such as the EUV 1-gamma node to be mass-produced in 2025.However, in the industry's competitive landscape, SK Hynix occupies more than 50% of the HBM market with its first-mover advantage, while Samsung accelerates mass production of the 12-layer HBM3E. Although Micron's market share has increased, it still needs to face the dual pressure of technological catch-up and customer competition.

Inventory cycle and production capacity game: Uncertainty in recovery timing

Micron's management has repeatedly emphasized that the adjustment of customer inventory is nearing completion, and demand is expected to pick up in the second half of fiscal year 2025.However, industry data shows that the full-year demand growth rate for DRAM and NAND in 2024 will drop to 5% and low double digits respectively, which is significantly lower than the long-term compound growth rate.At the same time, although Samsung and SK Hynix's NAND production cuts (production cuts exceeded 10% in Q1 in 2025) eased downward pressure on prices, a sudden power outage at Micron's Singapore factory led to a shortage of NAND supply and pushed it to raise prices to suppliers by more than 10%.Although this passive price increase strategy boosts profit margins in the short term, it may delay the inventory clearing process and aggravate the divergence of the pace of industry recovery.

Capital spending and technology blocking: The cost of long-term doctrine

In response to industry fluctuations, Micron announced that capital expenditures for fiscal year 2025 will reach US$14 billion, focusing on HBM R & D and advanced processes (such as 1-beta DRAM and 232-layer NAND), while reducing the capacity expansion of traditional memory chips.This strategy reflects the dilemma faced by storage giants: betting on AI-driven technology upgrades (such as HBM3E and CXL memory) while avoiding a repeat of the inventory crisis caused by the price crash in 2023.It is worth noting that Micron's leading position in QLC NAND and high-performance data center SSDs (such as the 9400 NVMe SSD) has won it differentiated competitiveness, but the overall slowdown in the NAND market and the hidden concerns of price wars still pose long-term risks.

Industry Outlook: Structural Differentiation and Valuation Restructuring

TrendForce predicts that the DRAM market will increase slightly year-on-year in 2025, while the NAND market may now decline, and the revenue of the three major storage manufacturers is facing downward pressure.In this context, Micron's valuation logic is shifting from traditional cyclical fluctuations to an AI-enabled growth narrative.If it can continue to increase HBM's market share (currently less than 15%) and optimize its product portfolio, it may partially hedge the decline of consumer electronics and achieve structural improvement in profit margins.However, potential macroeconomic fluctuations, geopolitical disruptions to supply chains (such as the recent Singapore factory accident), and whether AI computing power demand can continue to exceed expectations will remain key variables that determine the height of stock price rebound.