Micron posted a very strong quarter, yet its stock is plunging, according to The Globe and Mail.
On Sept. 30, Micron Technology (NASDAQ: MU) reported a monster fiscal fourth-quarter earnings report. The company set records across revenue, profitability, and cash generation. Ordinarily, blowout earnings give investors plenty of reasons to celebrate.
However, Micron stock has moved in the opposite direction over the last month. As of market close on Oct. 22, shares had declined roughly 20% since the earnings report and were trading nearly 29% below their all-time high.
What's important to understand is that Micron's sell-off isn't a reflection of a deteriorating business. Rather, investors are concerned about the sustainability of artificial intelligence (AI) spending, elevated valuations, and the likelihood that the memory industry's unusually high profitability won't last forever. Here's what investors need to know.
**Micron's earnings report was a blowout**
For the fiscal fourth quarter (period ended Sept. 3), Micron generated $54.2 billion in revenue, representing nearly 380% growth year over year and a 31% increase sequentially. Profitability was even more impressive. The company's gross margin reached 87%, compared with 45% in the prior-year period. Earnings per share (EPS) surged to $32.87, compared with just $2.83 a year earlier.
The company's Core Data Center unit generated $18 billion in revenue, up from $1.6 billion last year. The Cloud Memory segment contributed another $16.3 billion, nearly four times its figure from the fourth quarter of 2025.
Micron also produced nearly $44 billion in operating cash flow and $33 billion in adjusted free cash flow, underscoring that earnings growth is translating into robust cash generation. Management expects the momentum to continue. For fiscal Q1 2027, Micron guided for $61.5 billion in revenue and EPS of $37.84. So why are investors selling the stock so aggressively?
**Three reasons Micron stock is falling**
The first explanation is that Micron is not alone. Over the last month, there has been a broader sell-off among semiconductor stocks. The iShares Semiconductor ETF (NASDAQ: SOXX) has declined 15% since Micron reported earnings, which shows that weakness in the chip market extends beyond Micron itself.
Second, investors are increasingly concerned about the cost and sustainability of AI capital expenditures (capex). Hyperscalers such as Amazon, Microsoft, Alphabet, and Meta Platforms are budgeting hundreds of billions of dollars annually for data centers and advanced processors.
These investments require substantial financing beyond organic cash flow generation. Bond yields are elevated as companies increasingly tap debt markets, leading investors to question how long AI infrastructure spending can realistically keep accelerating.
Recent developments have reinforced some of these concerns. For instance, Tesla recently reduced its projected 2026 capex by 20%, from more than $25 billion to roughly $20 billion. Although this decision doesn't establish a broader framework for hyperscaler spending trends, it illustrates how some of the most ambitious AI developers are forced to balance infrastructure investment with financial discipline.
The third concern is the most obvious: investors remain wary of the durability of the memory supercycle given the industry's cyclical nature. If demand eventually exceeds today's scarce supply of high-bandwidth memory (HBM), average selling prices will normalize and profit margins will erode.
**Micron stock: Buy the dip or value trap?**
At approximately $887 per share, Micron trades at a forward price-to-earnings (P/E) ratio of 7. That's a modest valuation for a company experiencing its level of revenue and profit growth, supported by secular demand for its infrastructure.
Against this backdrop, I think Micron is a compelling opportunity to buy the dip rather than a value trap. At 7 times forward earnings, investors have already priced in considerable downside risk. For this reason, I see Micron as a compelling AI stock to buy and hold.