Micron Technology (NASDAQ: MU) shares fell 7.7% to $934 on Tuesday, snapping a strong rally that had pushed the stock above $1,000 in the prior session. The decline came as rising Treasury yields pressured the broader semiconductor sector, raising concerns about the cost of financing large-scale artificial intelligence infrastructure projects.
The selloff was not limited to Micron. South Korea's SK Hynix dropped 9.2%, while SanDisk fell nearly 10%. Other chipmakers also felt the heat: Advanced Micro Devices declined 5.4%, Intel slid 7.3%, and Nvidia slipped 2.4%. Custom-chip makers Marvell Technology and Broadcom fell 8.4% and 2.9%, respectively. Optical networking names such as Coherent, Ciena, and Lumentum Holdings were among the S&P 500's biggest losers, each dropping at least 9% during the session.
Rising yields weigh on AI spending outlook
The catalyst for the selloff was a climb in Treasury yields, which increases borrowing costs for companies investing heavily in AI infrastructure. Micron's own debt stood at $5.72 billion as of May, but analysts say the bigger concern is whether major customers might scale back AI-related capital expenditures as funding becomes more expensive.
Achilleas Georgolopoulos, senior market analyst at Trading Point XM, noted that AI-related investment is heading toward trillions of dollars, and higher funding costs, energy prices, and commodity costs could make that investment more expensive. The pressure extended across the sector, with AI chip stocks sliding as the 30-year Treasury yield hit 5.3%.
Profit-taking after a massive rally
Micron has gained more than 700% over the past 12 months, making it particularly sensitive to shifts in investor sentiment. David Wagner, head of equity at Aptus Capital Advisors, said the latest decline could indicate investors were taking profits after recent gains in AI hardware stocks. Ion Jauregui, an analyst at ActivTrades, echoed that view, saying volatility and profit-taking could remain elevated among high-beta technology stocks.
The pullback follows a period of strong momentum, as investors have grown increasingly confident about the durability of AI-related capital spending. However, rising expectations have also increased the potential for sharp moves when sentiment changes. Jefferies equities trading analyst Jeffrey Favuzza noted that the selloff followed weakness in Asia-listed technology stocks and could be linked to concerns about elevated Treasury yields.
Memory demand remains a key support
Despite the selloff, analysts point to continued demand for memory and storage products as a potential support for the sector. Paul Meeks, head of technology research at Freedom Capital Markets, said memory companies have "sterling fundamentals," while bearish investors remain concerned about a potential collapse in commodity chip pricing. Meeks also highlighted long-term customer agreements being signed by Micron and SanDisk, which guarantee floor pricing under multiyear deals that is higher than peak pricing seen during previous memory booms.
Jauregui said demand for memory and storage products remains strong and is increasing rapidly. He added that greater confidence in sustained AI capital expenditure should support the broader semiconductor sector. However, with expectations rising alongside share prices, investors could remain sensitive to any signs that AI spending or semiconductor demand is weakening. Jauregui said he remained bullish on the structural AI story while cautioning about short-term risks if expectations soften.
For context, the recent rally in memory stocks has been driven by AI demand and policy tailwinds, as Micron and SK Hynix surged on AI demand and US-China policy tightening the memory market. Some analysts see further upside, with Cramer saying memory stocks still have room to run despite massive 2025 gains. However, the current pullback highlights the sector's vulnerability to macro factors like rising yields.
This article is for informational purposes only and does not constitute financial advice.
