What Happened?
Shares of memory chips maker Micron (NASDAQ: MU) fell 4.6% in the afternoon session after investors took profits following the chip sector's strong rally in the first half of the year as Middle East tensions escalated.
SK Hynix shares fell over 5% in South Korea following its strong Nasdaq debut the previous week. The selloff dragged down memory peers like Micron Technology and SanDisk Adding to the weakness for memory stocks, a South Korean brokerage lowered its second-quarter earnings forecast for SK Hynix. Brokerage firm KIS projected SK Hynix's second-quarter operating profit at 60.4 trillion won, roughly 8% below the 65 trillion won market consensus. The expected miss stems from the company's heavy reliance on long-term contracts for its premium High Bandwidth Memory (HBM) chips, a structure that effectively locked the manufacturer out of recent 30% to 50% price surges in the broader spot market. It is natural to assume that selling more premium AI chips would immediately expand profit margins.
However, HBM economics work differently than standard memory. Because these advanced chips require massive upfront capital, they are typically sold through multi-year agreements that fix the price. Standard DRAM and NAND chips, by contrast, trade on the spot market where prices move freely. Consequently, SK Hynix's heavy exposure to premium, fixed-price contracts placed a near-term ceiling on its pricing power even as broader market prices spiked. This revelation triggered a reassessment across a memory sector priced for perfection, accelerating profit-taking among investors who were already questioning the durability of AI capital spending.
Adding to the defensive positioning, renewed tensions in the Middle East, including reports of US military action against Iran, pushed oil higher and encouraged a shift toward safer assets.
The shares were trading at $930, down 5% from the previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Micron? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Micron’s shares are extremely volatile and have had 56 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock gained 6% on the news that the company announced a massive expansion of its domestic manufacturing, raising its planned U.S. investment to $250 billion through 2035.
Notably, the company announced a $50 billion increase to its long-term capital expenditure plan, reflecting skyrocketing demand for the high-bandwidth memory that powers artificial intelligence. To support the buildout, Micron committed up to $3 billion to strengthen its domestic supply chain. This includes $500 million in strategic financing for GlobalWafers to expand a 300-millimeter raw silicon wafer facility in Sherman, Texas.
Crucially, the investment comes with a 10-year supply agreement, guaranteeing Micron the raw materials needed for advanced DRAM production. As AI data centers drain global memory capacity, raw material bottlenecks have emerged as a critical risk. Ben Tessone, Micron's chief procurement officer, stated that securing these inputs is "essential to supporting Micron's long-term growth and technology roadmap." By locking down capacity with the only vendor currently approved by the CHIPS Act to fabricate advanced 300mm wafers on U.S. soil, Micron is de-risking its revenue targets. A risk to note is the sheer cost of this domestic expansion: a $250 billion multi-decade price tag underscores how fiercely capital-intensive the memory industry has become.
Micron is up 195% since the beginning of the year, but at $930 per share, it is still trading 13.9% below its 52-week high of $1,080 from June 2026. Investors who bought $1,000 worth of Micron’s shares 5 years ago would now be looking at an investment worth $11,854.
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