Shares of Micron Technology Inc. (MU, Financial) sharply fell by approximately 15% after the chipmaker issued a downbeat forecast, citing weak demand for personal computers (PCs) and smartphones. The announcement overshadowed the growth of chips designed for artificial intelligence (AI), which had buoyed investor confidence in recent months.

• Warning! GuruFocus has detected 4 Warning Sign with MU.

Post-pandemic, the market for dynamic random access memory (DRAM) chips, which PCs and smartphones use, faces headwinds. The sector has been dragged by persistent supply chain problems and declining consumer demand. Although Micron is helping to keep NAND flash memory chip revenue 'flashing', Morningstar analyst William Kerwin warned there will be a `significant decline ' in flash revenue for fiscal 2025 due to Micron's exposure to such struggling end markets.

Demand has been further strained by Microsoft's (MSFT, Financial) gradual phase-out of Windows 10 and the slower-than-expected onset of Windows 11. Kerwin added that post-pandemic growth in traditional PCs fell short of expectations and that AI-enabled devices have not yet widely come to market.

If they stand, Thursday's losses would be Micron's biggest since January; its market cap could plunge over $17b to about $99b. The company's 22 percent gain earlier this year on optimism around AI-related chips is a sharp reversal.

Though the challenges continued in traditional markets, Micron is seeing strong sequential growth in high-bandwidth memory (HBM) chips, especially DRAM, for more advanced AI systems. The analyst added that Piper Sandler analysts view data center investments as a growth driver for Micron's HBM strategy in 2025, considering that they are solid.