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Micron reduces Q4 chip sales forecast, stock falls premarket

Yahoo Finance Live anchors discuss Micron stock performance.

Video Transcript

BRAD SMITH: From memes to Micron, let's talk about that stock this morning. Micron stock, that has been on the move after the company said in an 8-K filing it's cutting its fourth-quarter revenue guidance in line or below the low end of the $6.8 to $7.6 billion range it projected in June. Shares reacting down premarket by about 4.8%.

The company also said that its shipments are expected to decline sequentially in the first quarter. Another kind of part to this-- they unveiled a $40 billion investment. They're looking to create up to 40,000 jobs, as well, as part of that investment.

JULIE HYMAN: Yeah. I mean, this is just the latest of these companies, right? We had Intel, we had AMD, we had Nvidia-- all of them coming out and saying things are not going to be as good as expected. Now, this 8-K filing coming ahead of the CFO speaking at an industry conference, an analyst conference, today said this was related to that.

And the company also says it's going to be free cash flow negative in its fiscal first quarter. So all of these are related, right, that we are seeing lower demand. Micron, in particular, is a memory chip maker, so that's its business. And it says industry demand for DRAM and NAND, which are the two main types of memory chips, has declined since the June 30 earnings call, right. So that, again, we see this theme over and over again from these chip makers, from the retailers-- things have deteriorated very quickly.

I think we're going to hear it, as well-- we're speaking to the CEO of Redfin a little bit later in the show. The housing market, it's true there as well, that things have just shifted much more rapidly than any of these folks anticipated.

BRIAN SOZZI: Yeah. You mentioned Nvidia. Real quickly-- news of their morning broke on our show yesterday. We're still seeing Nvidia is the top ticker on Yahoo Finance on the platform again this morning. Shares are down 3%, of course, because of this Micron downgrade, but you get the sense that Micron, all these chip makers, don't have a lot of visibility in demand.

It was just a couple of weeks ago Micron set the stage for these warnings for Intel, AMD, and Nvidia and came out and warned significantly for their revenue. I think it was about a billion and a half dollars below consensus estimates at this time. So this is a severe warning. And I would say it's somewhat unfortunate that they're coming out with this warning and they're also mixing it in with a major investment off the CHIPS Act. This is terrible messaging.

Because in order to hire, what, 40,000 workers, they may have to lay people off after a quarter like this.

BRAD SMITH: Right. And so this is not surprising either because there are two different strategies that can be at play at a time like this, where you do have some of the major macroeconomic headwinds, and especially on the supply side. When a company like a Micron comes out and says, we're going to make this announcement right now, it's more signaling to the investors that we already know the time is bad, so why not just lean into R&D if we know that the spending-- or if the financials and the outlook are going to be this terrible, let's just lean into that.

BRIAN SOZZI: Yeah. Just forget our massive warning. Forget we can't forecast our sales by over a billion dollars. Over the next decade, we're going invest $40 billion and everything's great. Maybe if they invest $40 billion.

JULIE HYMAN: Well, they're also-- but they are cutting back on CapEx in the short term in chipmaking equipment, so this is a longer-term investment. And by the way, they came out with big fanfare and announced the thing this morning. It's part of an already existing plan for the company. It's just now that they can tie it into the CHIPS Act.

They had already planned $150 billion global investment goal. Now it's more of where they are putting that money that seems to be part of that estimate.

BRIAN SOZZI: I'm curious to how they're going to measure it. You mentioned a very good point in our morning meeting, and you have done this a lot. You know, a lot of these companies with these big announcements just saying, we're going to invest billions of dollars, how is it measured? When does it show up?

I mean, they drop this press release, and we never hear from them again.

BRAD SMITH: Well, what they did put in here is, they're looking to grow domestic production of memory from less than 2% to up to 10% in the global market. But again, the time frame, next decade.

BRIAN SOZZI: Yeah.

JULIE HYMAN: Right.

BRAD SMITH: So.