Micron Technology has been a standout AI winner this year #
Micron Technology stock fell 8.8% on Tuesday and by another 1.5% during premarket hours on Wednesday after South Korea's KOSPI index tanked by nearly 11% overnight in a broad semiconductor stock sell-off, increasingly driven by AI spending concerns and stiff Chinese competition.
The KOSPI crash comes after SK Hynix's lower-than-expected earnings that dragged the benchmark Korean index down to levels unseen in weeks. Note that SK Hynix delivered its strongest-ever quarterly performance on peak AI demand, but the stock still crashed, indicating dynamic investor expectations over the gap between AI spending and actual output.
The sell-off extended to the US stocks, where semiconductor companies faced mounting pressure amid growing investor anxiety about whether the AI investment boom can deliver promised returns.
Market experts attribute the downward pressures on the semiconductor sector to the massive spending by hyperscalers and concerns about lower-cost AI models from China reducing demand for premium memory and computing power.
However, Micron Technology CEO Sanjay Mehrotra was able to avoid the massive investment losses by selling $37.3 million worth of the MU stock on 24 July, days before the stock by a total of 15%. Mehrotra sold Micron shares through dozens of trades of varying sizes, which were publicly disclosed on 28th July, the same day of the crash.
Insider Stock Sale Likely Driven by Market Fears #
While the timing of Mehrotra's trades raises questions about insider trading, Morningstar equity analyst Jing Jie Yu believes that the market 'was likely spooked by the progress of China's chipmaking equipment capabilities, and was worried that this progress would threaten the competitive position of global chipmaking and chip equipment leaders.' Chinese memory maker CXMT's debut in Shanghai this week also fueled investor concerns that the company's rapid expansion could weigh on memory chip prices. Elsewhere, a Chinese state-backed company reportedly began mass-producing a key piece of chipmaking equipment, which likely fueled a sell-off in ASML shares.
US-listed shares of memory chipmakers like SK Hynix and Sandisk fell 9% and 14.2%, respectively. Meanwhile, semiconductor equipment manufacturers like ASML, Applied Materials, and Lam Research also fell 4.3%, 7.8%, and 7.5%, respectively.
However, Yu believes that 'the sell-off is largely a knee-jerk reaction and overdone,' arguing that major global chipmakers are unlikely to face meaningful competitive threats.
Regarding Micron, note that the company is actually spending aggressively on expanding tools and capacity but is not pouring every dollar into it by going deep into debt, which could cushion the memory maker from a market downturn, while its peers like Applied Materials experience a big drop in tool orders.
Micron Vulnerable to Profit-Booking Activity #
Micron had been a winner from the AI boom, gaining over 180% year-to-date after delivering blockbuster growth. Despite record earnings results this year, the stock's massive run-up had made it vulnerable to profit-taking and sentiment shifts, particularly as investors began questioning whether hyperscaler spending could sustain the explosive growth rates of the past year.
The latest semiconductor stocks crash came ahead of earnings reports from major hyperscaler customers like Meta and Microsoft on Wednesday and Amazon on Thursday, which could offer clarity on future capital spending plans.
The latest sell-off underscored how concentrated the AI trade had become in a small number of chipmaking stocks, with the heaviest losses falling on memory chip suppliers that had benefited most from the data centre buildout.
When sentiment shifted, the impact was swift and severe, particularly in markets like South Korea, where Samsung and SK Hynix dominate the index and part of the economy.
Disclaimer: Our digital media content is for informational purposes only and does not constitute investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks, and past performance does not guarantee future returns.
© Copyright IBTimes 2025. All rights reserved.