Goldman Sachs downgraded Micron (NASDAQ: MU) to neutral from buy on Wednesday, further exasperating a violent selloff in memory chip stocks this month.
The investment bank's analyst Mark Delaney cited "incremental weakness in both DRAM and NAND fundamentals per our discussions with industry contacts, and also based on our supply/demand analysis," in a note to clients.
"Memory downturns usually last for several quarters and can see an acceleration in price declines, as customers delay procurement to wait for lower prices when possible, causing a snowballing effect that can lead downturns to be worse than initially anticipated by investors," the note added.
In late August, Micron made headlines when it announced plans to invest $3 billion by 2030 to increase memory production at its plant in Manassas, Virginia, creating 1,100 new jobs roughly over the next decade. These investments are contemplated in Micron’s long-term model to invest capital expenditure in the low 30s as a percent of revenue.
The expansion will position the Manassas site — located about 40 miles west of Washington, D.C. — to support Micron’s leadership in the rapidly growing market for high quality, high reliability memory products.
Micron shares tumbled 3.5% in Wednesday's pre-market session and are now down 12% in one week through Tuesday. The shares opened Wednesday trading down $1.90, or 4.4%, to $41.70
Certain chip stocks have tumbled since last week when KLA-Tencor (NASDAQ: KLAC) warned at a conference about weakness in the memory chip market. Along with Micron, KLA shares are off by 11% in one week through Tuesday.
