Micron's Record High Collides with Tax Jitters as AI Memory Demand Roars On

Profit-taking and South Korea's proposed AI windfall tax sparked a 9% pullback in Micron stock, but strong demand and sold-out HBM through 2026 support bullish outlook.

Profit-taking and a surprise policy comment from South Korea conspired to knock Micron Technology back from its record peak on Tuesday, even as the chipmaker’s operational outlook remains as bright as ever. The stock tumbled as much as 9% from its all-time high of €676 before settling at €652.40 on the German exchanges, a 3.75% decline on the Nasdaq. The pullback ended a blistering run that had seen the shares more than double since the start of the year.

The catalyst for the selling was twofold. First, South Korean presidential chief of staff Kim Yong-beom floated the idea of a special tax on so-called AI windfall profits to fund a national dividend. The proposal is not yet official policy, but traders immediately worried about a domino effect if other nations follow Seoul’s lead. Second, U.S. inflation data came in hotter than expected, with April consumer prices rising 3.8% year-over-year. That pushed the yield on ten-year Treasuries to 4.45%, making richly valued tech stocks look less appealing.

The technical picture had already flashed warning signs. On Monday, the Relative Strength Index hit an extreme reading of 85, a classic overbought signal. After Tuesday’s retreat the RSI cooled to near 78 — still elevated, but enough to release some of the steam built up during the rally. Competitors Intel and Qualcomm also came under pressure as the broader semiconductor sector took a breather.

None of the selling, however, reflects any deterioration in Micron’s business. The company’s entire High-Bandwidth Memory production is sold out through 2026, with large portions of 2027 capacity already locked in via binding contracts. NAND flash is running at full utilization for the current year. A potential strike at rival Samsung could further tighten global supply.

Micron is also pushing the product envelope. The company is currently testing new server modules with 256 gigabytes of capacity designed specifically for AI data centers. These modules are 40% faster than previous generations and consume significantly less power — a crucial advantage as hyperscalers grapple with sky-high electricity bills.

The financial results underscore the momentum. In the second fiscal quarter, revenue nearly tripled year-over-year to almost $24 billion, with gross margin hitting 75%. For the third quarter of fiscal 2026, management has guided for $33.5 billion in sales and an impressive 81% gross margin, fueled by the ramp of the new high-performance memory products.

Wall Street remains largely bullish. D.A. Davidson and Deutsche Bank both have price targets of $1,000. Investor Ross Gerber sees earnings per share of $57 in 2026 and a target of $1,140. Bernstein’s Mark Li, more cautious, sets his target at $510 but expects rising contract prices to support the thesis. Institutional investors now own roughly 81% of Micron’s shares, and the HighPoint Advisor Group recently increased its stake substantially.

Yet inside the C-suite, the mood appears more cautious. Company insiders have sold millions of dollars’ worth of stock in recent months. Chief executive Sanjay Mehrotra offloaded a large block of shares in early May. With the RSI still flashing overbought signals prior to Tuesday’s drop, the profit-taking from both retail and corporate sellers looks more like a healthy reset than a fundamental shift. For now, the only real constraint on Micron’s trajectory is the pace at which it can build more fab capacity.