Memory chipmaker Micron (MU) stock slid in the early trading Tuesday as the memory industry continues to grapple with the fallout from Google’s (GOOG, GOOGL) TurboQuant compression algorithm, which claims to improve AI model efficiency.
The fear among investors is that more efficient AI will lead to a drop in demand for high-bandwidth memory, a key component in AI data centers that has become increasingly important as AI models have continued to balloon in size.
But in a note to investors on Thursday, Morgan Stanley analyst Joseph Moore said that despite continued efficiency improvements in AI, “[t]here’s just no indication that demand for memory or storage is going down.”
Read more about Micron’s stock moves and today’s market action.
Moore also noted that memory will play a key role in the growth of agentic AI, which can perform tasks either semiautonomously or fully on its own. That’s because when an AI agent performs a task — say, opening a website and navigating to a page for a user — it’s leaning on the processing power necessary to run the model and going to that web page, two things that will require more memory.
“It’s our view that the best way to play growth in general purpose servers will be memory,” Moore wrote.
“AMD (AMD) and Intel (INTC) should see some benefit from rising prices, but the increases are measured — processors are not a commodity,” he added. “Both stocks have higher multiples pricing in prospects for Intel in Foundry, and AMD in AI, which to us remain less certain; buying memory stocks at these levels seems a higher leverage way to play this agentic strength.”
Micron stock is down more than 27% since it reported blowout second quarter results on March 18. At the time, the company posted earnings per share (EPS) of $12.20 on revenue of $23.86 billion.
That amounted to an EPS increase of 682% year over year and a revenue jump of 196%. Wall Street was anticipating EPS of $9 on revenue of $19.7 billion year over year.
Micron also said it expects Q3 revenue above analysts’ forecasts.
But the company’s shares have fallen ever since, dragging down stocks of rival memory chipmakers SK Hynix (000660.KS) and Samsung (005930.KS).
Despite the recent declines, the three companies’ stocks have been on a tear. Micron is still up 263% over the past 12 months, while SK Hynix has climbed 323% in the period. Samsung stock is also up, rising 189%.
The massive need for memory in AI data centers, however, has led to a global shortfall for the rest of the tech industry, creating a broader memory crisis that analysts say will force companies from computer and smartphone makers to either increase prices of their memory-dependent products or take a hit to their margins.
