Why is Micron stock falling today?

Micron Technology MU shares fell more than 1.8% on Friday as investors weighed fresh investment plans from South Korean memory chip maker SK Hynix alongside a more cautious outlook for memory pricing from Citi.

The memory-chip maker has declined about 9% over the past month, although the stock remains up more than 660% over the past 12 months.

Investor attention remains focused on when memory chip supply will catch up with surging demand driven by artificial intelligence infrastructure.

On Friday, SK Hynix said its board approved 54.3 trillion won ($38.15 billion) in investments for new chip fabrication facilities in South Korea.

The announcement follows even larger investment commitments made earlier this year.

In June, SK Hynix and Samsung said they would spend a combined 800 trillion won ($518.58 billion) to build new semiconductor manufacturing hubs in southwest Korea.

However, additional supply is not expected to arrive immediately.

Large semiconductor fabrication plants typically require years to construct.

Micron's own $100 billion manufacturing project in New York, announced in 2022, is not expected to begin production until 2030, while no major new memory manufacturing capacity is expected to come online until roughly next year, with additional capacity planned for 2028.

Citi cuts price target as memory pricing outlook softens

Citi lowered its price target on Micron to $1,150 from $1,400 while maintaining its Buy rating, reflecting a more moderate outlook for DRAM and NAND pricing over the coming quarters.

The bank reduced its valuation multiple to 8 times revised calendar-year 2027 earnings estimates from 10 times previously.

"We trim MU TP to $1,150 from $1,400 based on 8x P/E vs prior 10x times revised C27 EPS to reflect lower market multiples on mixed memory peer results," the Citi analyst wrote.

The revision followed meetings with memory supply chain participants and third-party experts during the "Future of Memory and Storage" conference.

"We see both DRAM and NAND prices decelerating Q/Q in the next four quarters with prices peaking in 2Q of next year," the analyst said.

Citi now expects DRAM prices to decline 3% in the second half of 2027 compared with its previous expectation for flat pricing.

NAND prices are projected to fall 5% during the same period. The firm also reduced its fiscal 2027 and 2028 earnings estimates by 1% and 2%, respectively.

The bank also expects Micron's profitability to moderate as pricing eases.

"We expect Micron's gross margins to decline from current mid-80s and sustain in mid-70s next year as prices decline from a high base with ~40% DRAM bits under LTA pricing contracts," the analyst wrote.

China expansion remains a longer-term concern

Beyond near-term pricing, Citi identified expanding Chinese memory production as its biggest structural concern.

"China competition and capacity additions in both NAND and DRAM markets is the biggest risk to our thesis," the analysts said.

According to Citi, China's leading NAND producer YMTC plans to increase capacity by adding 50,000 to 60,000 wafer starts next year to its existing 200,000-unit capacity and aims to become the world's largest NAND manufacturer by 2030.

DRAM producer CXMT also plans to expand production from roughly 350,000 wafers to around 400,000 next year, with a longer-term target of approximately 600,000 wafers by 2030, although Citi noted that yields remain low.

While US export restrictions limit Chinese-made memory sales into the United States, Citi warned that competition could still affect Micron internationally.

"While US government is unlikely to allow made in China memory sales to US, sales to data centers in other regions like Europe could indirectly impact Micron," analysts wrote.