Investing.com -- Shares of Western Digital Corp (NASDAQ:WDC) fell by 4% as the market responded to a gloomy earnings forecast by industry peer Micron Technology (NASDAQ:MU), which has heightened concerns about weakening demand in the semiconductor sector. Similarly, Applied Materials Inc (NASDAQ:AMAT), KLA Corp (NASDAQ:KLAC), and Lam Research Corp (NASDAQ:LRCX) saw their shares drop 1.7%, 2.1%, and 2.9% respectively in extended trading.
The downward trend across chipmaker stocks was precipitated by Micron's projection of second-quarter revenue and profit that fell short of Wall Street's expectations. The forecast, released Wednesday, pointed to lower memory chip prices and subdued demand for handsets and PCs, which in turn has affected the earnings potential for these companies. Micron's shares plunged 13.6% in extended trading, reflecting the market's reaction to the news.
Micron, based in Boise, Idaho, generates the majority of its revenue from DRAM chips, which are currently experiencing a market slump due to weak consumer demand and an oversupply. These chips are a critical component in a variety of computing devices, from data centers to smartphones. The company's stock has suffered a significant decline, dropping more than 30% from its peak in June, amid these market challenges.
Global PC shipments have also declined, with a 1.3% drop in the third quarter of the calendar year 2024, as reported by Gartner (NYSE:IT). Micron's CEO Sanjay Mehrotra commented on the slower-than-expected PC refresh cycle and projected flat growth in PC unit volumes for the calendar year 2024, which is slightly below previous forecasts.
Despite these challenges, Mehrotra expressed a long-term positive outlook for AI PC adoption. However, for the immediate second quarter, Micron has set its earnings expectations at $1.43 per share, plus or minus 10 cents, which is notably lower than the analyst consensus of $1.91. The company also anticipates second-quarter revenue to be around $7.90 billion, plus or minus $200 million, again falling short of the expected $8.98 billion.
The overarching issue of weak demand for PCs and smartphones, particularly in significant markets like China, has led to reduced inventory levels and an excess supply of memory chips. While Micron is expanding its operations with a new mega campus for DRAM chip production in New York state, and continues to offer flash memory NAND chips for data storage, the current market conditions have cast a shadow over the sector, impacting related stocks like Western Digital and others.
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