Micron Technology was sliding early Friday. A warning from Intel about the surging cost of memory chips is a reminder of its extraordinary profitability but might also provoke worries about the sustainability of the hardware cycle.
Micron shares were down 4.5% at $892.19. That was broadly in line with the wider semiconductor sector, which was falling after Intel and Amazon earnings both disappointed the market late Thursday.
Intel attributed at least part of its problems directly to the shortage of memory chips, which it said were hitting the PC market and therefore demand for its chips.
"We do not expect a sustained recovery until memory availability improves and pricing begins to normalize," said Intel CFO Dave Zinsner, in an earnings call. "We are not optimistic about next year in terms of memory."
Of course, a memory-supply crisis means bigger profits for Micron. But some of its customers -- especially those making lower-end smartphones and other devices instead of artificial-intelligence hardware -- are being forced to scale back their specifications or pass on price increases.
The risk is that if at some point AI spending falters, then Micron and its memory chip peers will find that PC and smartphone customers have already pulled back on hardware spending and are unable to fill the gap.
So far there's no real indication of a pullback in AI investment. The majority of the major technology companies that reported this week at least maintained their capital expenditure guidance, with only Microsoft reducing its capex forecast by a small amount, citing delayed third-party capacity deliveries.
But Micron is still dogged by fears of past memory-chip cycles where shortages were followed by a glut of supply and steep earnings falls. And that means Intel's memory concerns are a mixed message for the stock.
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