Micron blew the lights out on earnings, so why is the stock dropping?

For a company of its size, Micron delivered one of the most stunning beats in recent memory yesterday, with shades of Nvidia in the early days of the AI boom, as revenue came in 21% ahead of Bloomberg-compiled analyst estimates and adjusted earnings per share beat by 36%.

Indeed, as our colleague Luke Kawa wrote, the “AI growth torch passed from GPUs to memory,” with Micron notching 196% annual revenue growth in Q2.

And yet, as of 6:52 a.m. ET, Micron is trading a touch over $435 a share, down more than 5% from yesterday’s closing price. Fellow memory stock peer Sandisk isn’t faring any better, down 5.4%.

Some pundits on Wall Street might rush to point out higher capital expenditure and minimal further upside to gross margins as reasons that the stock is in the red. And while it is true that Micron now expects capital spending to exceed $25 billion this fiscal year — analysts had only forecast $22.4 billion — it takes some remarkable gymnastics to believe that a ~10% capex bump is the reason for softness in the share price, especially when the company has also forecast Q3 revenue of $33.5 billion at the midpoint of its range, some 41% ahead of the $23.7 billion analyst estimate.

A simpler explanation is that red-hot Micron has roughly doubled since mid-December, has risen 283% since July 1 of last year, and is now bigger than Netflix and Costco, and that the buy side’s expectations were just maybe a little more elevated than those on the sell side.

Longer-term concerns about how long the memory supply crunch might last and whether Micron can sign more multiyear deals (the company has only signed one, so far) could also be playing on the minds of investors. And, of course, it doesn’t help that equities generally got hammered yesterday as concerns about inflation and the global supply of oil weighed on risk assets.