South Korean Tax Talk and Overbought Signals Test Micron's 152% AI Rally

Micron's 152% rally hit by South Korean tax talk and hot inflation; record $24B revenue, overbought RSI, analyst targets $1,000 provide mixed outlook.

Micron Technology’s relentless climb hit a sudden roadblock this week after a South Korean government official floated a special levy on artificial intelligence profits, triggering an 8% sell-off in U.S. trading. The move dragged the stock back from a fresh 52-week high of €680, where it had landed on Monday, to around $730 in New York. Inflation data coming in hotter than expected added further pressure, giving profit-takers ample cover.

The pullback snaps a stunning run that has left the memory-chip maker up 152% since the start of the year. Market researchers at Gartner see prices for DRAM and SSD storage climbing another 130% by year-end, suggesting the rally has fundamental fuel left. Yet the technical picture had already been flashing warning signs: the relative-strength index hit 85 before the drop, a level that screams overbought, and has since eased to near 78.

Record Revenue and Sold-Out Factories

Operationally, Micron could hardly be in stronger shape. Revenue in the second quarter hit a record $24 billion as gross margin surged to 74%, underscoring the pricing power that comes with a full-blown supply crunch. The company’s high-bandwidth memory capacity is booked solid for the next two years, and there is no spare NAND capacity either. Capital expenditure for the current fiscal year will rise above $25 billion as Micron races to expand output.

New products are arriving at pace. The company is now sampling 256-gigabyte DDR5 server modules that run about 40% faster than previous generations while consuming 40% less power than using two smaller modules — a combination that makes them highly attractive for power-hungry AI data centers.

A Volatile Mix of Tailwinds and Headwinds

The same forces that are supercharging demand are also creating geopolitical friction. The proposed South Korean tax on AI profits — still only an idea — spooked investors already wary of stretched valuations. Separately, a potential strike by tens of thousands of workers at Samsung Electronics later this month could further tighten supply in Micron’s favor, giving it even more pricing leverage.

Insiders have been taking advantage of the elevated share price. Vice president Sumit Sadana recently sold 24,000 shares, and colleague April Arnzen offloaded a large block in the prior quarter. The company, meanwhile, raised its quarterly dividend by 25% to $0.15 a share, a sign of confidence from management.

Analysts remain broadly bullish. D.A. Davidson and Deutsche Bank both set price targets of $1,000, pointing to the structural shift in the memory industry driven by AI infrastructure. The CME Group’s plan to launch “compute futures” in partnership with Silicon Data — allowing cloud providers and developers to hedge computing costs — underscores how central hardware like Micron’s has become to the financial ecosystem.

For now, the stock is caught between blistering fundamentals and the technical and political noise that often accompanies a 152% rally. The next move will likely depend on whether the South Korean tax proposal gains traction — and whether earnings can continue to surprise to the upside.