What Happened?
Shares of memory chips maker Micron (NYSE:MU) fell 14.9% in the afternoon session after President Trump announced "reciprocal tariffs" on all US imports, set at a minimum rate of 10%.
From clothing brands and electronics makers to the e-commerce sites that move their goods, companies built on global supply chains took the biggest hit. Stocks with heavy exposure to Asia were especially hard-hit, as the new tariffs threatened the growth and profits of firms with factories in the region. Vietnam, central to many companies' production plans, faced a 46% tariff. Cambodia and Indonesia were also in the crosshairs, with tariff rates of 49% and 32%. These measures could significantly erode the competitiveness of goods produced in those regions. For example, reduced production volumes would negatively affect the sales growth of all companies benefiting from these manufacturing hubs.
The shares closed the day at $74.34, down 16.1% from previous close.
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What The Market Is Telling Us
Micron’s shares are very volatile and have had 24 moves greater than 5% over the last year. But moves this big are rare even for Micron and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 13 days ago when the stock dropped 8.8% on the news that the company reported first-quarter (fiscal Q2 2025) results, which came with high expectations, but while the overall performance was decent, softness in key markets, weaker margins, and inventory concerns overshadowed the positives.
Notably, inventory levels saw a material increase, partly due to weakness in the automotive and mobile segments. Additionally, declining NAND prices put pressure on margins, resulting in a significant sequential drop in profits. While the DRAM business continued to show strong year-over-year growth and remained a key driver, sequential sales declined, raising questions about the sustainability of demand for memory devices used in AI computing platforms.
On the bright side, Micron exceeded analysts' expectations on both revenue and EPS. More importantly, its guidance for the next quarter came in ahead of Wall Street forecasts. That said, management flagged concerns about NAND oversupply and pricing pressures, which could weigh on future margins and revenue. Overall, this was a mixed quarter with significant areas of concern.
Micron is down 14.6% since the beginning of the year, and at $74.59 per share, it is trading 51.4% below its 52-week high of $153.45 from June 2024. Investors who bought $1,000 worth of Micron’s shares 5 years ago would now be looking at an investment worth $1,810.
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