Micron’s latest quarterly performance has raised concerns, not only for the company itself but for the broader technology industry. The company’s failure to meet its expected figures and subsequent reduction of its forecast for the current quarter points to challenges within the memory chip sector. Analyst Daniel Newman argues that these issues are symptomatic of a larger trend in the technology sector. Specifically, the much-anticipated revolution in PCs and smartphones driven by artificial intelligence (AI) has not materialized, and it may not for the foreseeable future.
Micron’s Financial Challenges and Lowered Expectations
A significant factor contributing to Micron’s current struggles is the weaker-than-expected demand for memory components, particularly for PCs and smartphones. For the quarter, Micron posted a revenue of $8.709 billion, slightly below the $8.721 billion that analysts had predicted. The company’s forecast for the next quarter is even more concerning, with a projection of $7.9 billion in revenue compared to Wall Street’s estimate of $8.98 billion. This discrepancy has resulted in a sharp 16% drop in the company’s stock price.
However, while these figures are disappointing, Newman argues that they do not indicate the impending collapse of the technology industry or the end of AI. According to him, this is not “the beginning of the end for the AI industry,” nor does it signal a downfall for companies like Nvidia, which continue to perform well in the HBM memory market. Micron’s reliance on HBM memory, expected to grow significantly in the coming years, has not shielded it from the broader slowdown in demand for PC and smartphone components.
AI and the Struggling PC Market
The core of Micron’s business remains the production of memory chips for PCs and smartphones. Unfortunately, this segment has experienced a downturn as shipments of PCs and smartphones have not met expectations. Micron has also been grappling with slow-moving customer inventories, resulting in a further reduction in orders and sales.
Newman notes that the anticipated “AI supercycle” has failed to materialize. While AI was expected to drive a surge in demand for AI-enabled PCs in 2023 and 2024, this has not happened. Instead, demand has been driven primarily by faster CPUs and GPUs, according to a report from IDC Research. Trendforce also suggests that the need to upgrade PCs from Windows 10 to Windows 11 will have a stronger impact on sales than AI-related factors. This is a clear sign that AI is not yet the driving force for growth in the PC market.
Even companies like Qualcomm, which have been heavily investing in AI chips for laptops, have faced difficulties. Qualcomm’s new Snapdragon X chips for high-end laptops have underperformed, capturing only 0.8% of the PC market in the third quarter with just 720,000 units sold. While the company continues to release new models with improved performance and lower prices, the weak demand for AI-driven PCs makes these price cuts necessary. This highlights a significant issue in the industry: the local implementation of AI on PCs is not yet compelling enough for consumers. AI software remains largely an enthusiast’s hobby, and services like ChatGPT are cloud-based, requiring no local processing power.
The Road Ahead for AI and the Tech Industry
Despite the lack of consumer enthusiasm for AI-enabled PCs, there are still bright spots in the technology sector. The demand for HBM memory remains high, driven by server products from major companies like Nvidia, Broadcom, AMD, and Marvell. The broader AI industry has not collapsed; however, if AI does eventually prove to be a bubble, the lack of explosive consumer demand for AI at the local level could serve as a warning sign.
At present, AI has become a standard feature in new products, much like multi-core processors, integrated graphics, and SSDs, notes NIXSOLUTIONS. Consumers no longer see AI as a unique selling point but expect it as a baseline feature. As a result, there is little incentive to specifically buy an “AI PC,” but consumers are unlikely to purchase non-AI PCs either, as they would be considered outdated. This trend suggests that while the technology industry faces challenges, particularly in the AI space, there is no immediate indication of a collapse.
We’ll keep you updated as more integrations become available, and the technology sector continues to adapt to changing demands. However, the current state of the AI-driven PC market shows that the anticipated revolution has yet to occur.