Micron (MU) Stock; Slides as Auto Deals Fail to Shield Core DRAM Business From Market Risks

TLDRs;

• Micron shares fell as investors questioned whether new auto contracts can protect its dominant DRAM business.
• Only a portion of Micron’s DRAM output is covered by long-term agreements despite major customer commitments.
• Memory chip rivals also declined as markets weighed supply risks and future AI demand uncertainty.
• Micron expects industry shortages beyond 2027, but investors remain cautious about pricing pressures.

Micron Technology (NASDAQ: MU) stock came under pressure as investors looked beyond the company’s newly announced automotive supply agreements and focused on the limited protection those contracts provide for its core memory business. Shares declined after the market raised concerns that most of Micron’s high-revenue DRAM segment remains exposed to shifting semiconductor prices.

The memory chip maker was set to open lower in Thursday trading, falling around 4.6% in premarket activity to approximately $862.70. The move followed an 8% decline in the previous session, when shares closed at $904.28 as investors reassessed the strength of the semiconductor recovery and the company’s ability to maintain pricing power.

Auto Contracts Offer Limited Protection

Micron has secured several long-term agreements designed to create more predictable revenue streams, particularly as demand for advanced automotive technology continues to grow. However, the company’s latest contracts do not fully cover its largest business segment.

Micron Technology, Inc., MU

DRAM, which accounted for roughly 76% of Micron’s recent quarterly revenue, remains the biggest driver of the company’s financial performance. Yet only about 20% of DRAM volume is currently protected by signed agreements. This leaves a significant portion of the business vulnerable to market fluctuations, especially if supply increases or demand weakens.

By comparison, NAND storage products, which represented about 24% of revenue, have stronger contract coverage, with roughly one-third of volume tied to agreements.

The difference has raised concerns among investors who expected the new contracts to provide a stronger buffer against memory market volatility.

Investors Question Memory Demand

The newly announced deals are significant in size. Micron is seeking billions of dollars in deposits and customer commitments, with many agreements extending toward the end of the decade. The contracts include take-or-pay structures, meaning customers commit to purchasing agreed volumes regardless of short-term market conditions.

Micron expects these agreements to eventually support at least half of its total revenue, improving visibility and reducing exposure to unpredictable spot market pricing.

CEO Sanjay Mehrotra said the contracts would improve the company’s revenue stability and strengthen its long-term business outlook. However, investors remain focused on the immediate challenge: protecting DRAM margins, which continue to determine the company’s overall performance.

The concern comes at a time when the semiconductor industry is balancing strong artificial intelligence demand against fears of potential oversupply. If chip manufacturers increase production too quickly or AI-related demand slows, memory prices could face renewed pressure.

Semiconductor Stocks Face Broad Selloff

Micron’s decline was part of a wider move lower across major memory chip companies. South Korea’s SK hynix dropped sharply, while Samsung Electronics also recorded significant losses as investors reacted to concerns surrounding the global memory market.

The broader semiconductor sector has benefited from enthusiasm around AI infrastructure, with companies supplying processors, memory, and data center components seeing strong investor interest. However, recent volatility highlights concerns that expectations may have moved ahead of actual demand growth.

Authorities in South Korea also moved to restrict leveraged single-stock funds following the sharp market swings, reflecting concerns about amplified volatility in semiconductor shares.