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Why Micron Stock Just Sank
Key Points
Micron and other tech stocks are losing ground as investors weigh macroeconomic risk factors.
The stock also faced pressures due to concerns about regulations for the AI market and employee compensation news.
Micron (NASDAQ: MU) stock had a tough day on the market on Thursday, with the company's share price declining 4.7% in the day's trading. Meanwhile, the S&P 500 and the Nasdaq Composite each declined 0.6% in the session. The memory chip leader's share price had been down as much as 5.3% in the session.
The broader market saw bearish momentum in Thursday's trading as investors repositioned in response to macroeconomic risk factors. In addition to concerns about Treasury bond yields, oil prices, and inflation, Micron's share price was also pressured by regulatory concerns surrounding the artificial intelligence industry and news about the company's employee compensation plans.
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Image source: Getty Images.
The macro picture is making investors more risk averse
Yields on U.S. Treasury bonds are rising despite amid moves by the Treasury Department to ramp up its buybacks of government bonds. While buybacks are often a mechanism for tamping down on bond yields, that hasn't been working recently. The yield on 10-year U.S. Treasury bonds hit 4.84% on Thursday -- marking the highest level since 2023.
High bond yields tend to pull investment dollars out of the stock market and typically reflect a more risk-averse environment. Along with rising oil prices and concerns about the potential for hotter-than-expected inflation in this week's Consumer Price Index (CPI) report, the macroeconomic picture is causing some jitters.
AI fears and increased expenses for Micron
In response to concerns about the potential for artificial intelligence systems to go rogue or otherwise create destructive outcomes, there's been a recent uptick in discussion about the need for regulatory frameworks and guardrails for the industry. While new regulations would be unlikely to dramatically alter demand for Micron's products, they could create growth headwinds.
Adding to selling pressures on Micron stock, the company is offering huge bonuses for employees at its plants in Taiwan in order to resolve potential strike issues. While boosting employee pay packages looks like the right move at a time when the company is thriving and enjoying incredible demand for its products, the move could have a modest impact on margins.
Keith Noonan has positions in Micron Technology. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.