Jensen Huang Downplays Memory Glut Fears: Will Micron Rebound Next?

Micron Technology (NASDAQ:MU) remains in a technical correction, having fallen 18.8% from its peak earlier this month. The weakness coincides with an ongoing sell-off in artificial intelligence stocks, despite Nvidia (NASDAQ:NVDA) CEO Jensen Huang dismissing memory glut fears.

Micron Technologies and other memory stocks have remained under pressure in the past few months. The Roundhill Memory ETF (CBOE: DRAM) has slumped more than 40% from its all-time high, while its outflows have surged. 

The ongoing weakness is partly because investors worry about a potential artificial intelligence bubble. Prominent figures like Ray Dalio, Ken Griffin, and Michael Burry have warned that the bubble may burst as interest rates rise. 

At the same time, concerns remain about a glut in the memory industry, since the sector is highly cyclical. In a statement today, Huang told CNBC that he saw no signs of a 2029 memory glut:

"We’re the first company in the world to put LPDDR memory — what goes into your cell phones — into the world’s data centers, and it’s enabled us to deliver performance that’s twice as energy efficient as anything in the world today, and so we’re going to continue to use abundant amounts of them as well."

In a separate statement, Huang said that demand in the AI infrastructure industry was strengthening. He cited the neocloud industry, where Nvidia has invested heavily in companies like CoreWeave (NASDAQ:CRWV), IREN (NASDAQ:IREN), and Nebius (NASDAQ:NBIS). He said that demand for neocloud firms was "off the charts." 

Micron’s Business is Seeing Strong Demand

The most recent earnings report showed that its revenue and profits surged in the fiscal fourth quarter. Revenue soared 379% to $54 billion, bringing the annual figure to $133 billion. Benzinga data shows analysts expect the revenue to jump to $275 billion this year and $318 billion in the next financial year. 

Demand for Micron is coming mostly from top hyperscalers, which are boosting their data center spending. In a report released last week, Gartner (NYSE:IT) predicted AI infrastructure spending will hit $1 trillion this year and add another $6 trillion between 2027 and 2030. Some of these funds will flow to Micron and other memory companies. 

Micron Stock is Undervalued, But Technical Risks Remain

Micron’s ongoing stock drop has made it look like a bargain by most metrics. Its forward price-to-earnings (P/E) ratio has fallen to 5.18, well below the technology sector median of 22 and its own five-year average of 74. Micron also has one of the highest Rule of 40 scores on Wall Street. Adding its revenue growth rate and its profit margin brings the score to about 170%.

The risk, however, is its technicals. It has dropped below the 100-day moving average and formed a bearish flag pattern. This pattern consists of a vertical line and a horizontal channel. In most cases, it leads to a strong bearish breakout that may push the stock to the $740 support level.

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