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Why MicronStock Dropped on Thursday
Key Points
Interest rate worries eased for Micron investors today.
But then, OpenAI raised a new worry about the revenue needed to buy Micron chips.
Lynx Equity Strategies remains optimistic and predicts memory prices will keep rising.
Micron (NASDAQ:MU) stock tumbled in Thursday trading, closing the day down 4.8% -- but the news wasn't as bad as you might think.
Bond yields declined Thursday, suggesting the cost Micron customers bear when financing their purchases of memory chips won't climb forever. Furthermore, minutes released from the last meeting of the Federal Reserve Open Markets Committee indicate the Fed may not keep raising interest rates to combat inflation -- also good news for debtors.
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Unfortunately for Micron investors, that wasn't all the news that came out Thursday. As CNBC reports, OpenAI just confirmed that its annual recurring revenue as of the end of September was only $50 billion -- not the $68 billion previously posited.
Image source: Micron.
What that means for Micron stock
If OpenAI's not making as much money as it thought it was, then Micron's customers might actually need to take on more loans to buy the company's memory chips. Because if they're anything like OpenAI, their revenues may not be generating enough cash to pay for those chips out of cash flow alone!
What's next for Micron stock
So is it time for Micron shareholders to panic? Not necessarily.
Although OpenAI fell short of the mark in September, the company still grew its revenue run rate 77% in the September quarter. And a new report out of Lynx Equity Strategies today confirms that the AI revolution is alive and well.
Tight supply of memory chips has driven up the prices Micron can charge for its wares, and according to Lynx analyst KC Rajkumar, memory supply in 2027 and 2028 will be "significantly tighter than in fiscal 2026."
Tight supply is just what Micron needs to keep its profits growing. Trading at 7x next year's earnings, Micron stock still looks like a buy to me.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.