Micron locks in 7 auto chip deals as AI capex slowdown fears mount

Micron Technology secured long-term supply agreements with seven automotive suppliers, extending its AI memory business beyond data centers even as institutional investors rotate out of semiconductor stocks on fears of slowing hyperscaler spending.

Micron Technology (MU) signed strategic customer agreements with Qualcomm, Hyundai Mobis and five other automotive suppliers to lock in memory and storage supply for AI-enabled vehicles, broadening its revenue base beyond data centers.

"The next phase of automotive innovation will depend on the strength of the ecosystem behind it," Sanjay Mehrotra, chairman, president and chief executive officer of Micron, said in a statement Thursday.

The agreements cover Visteon, Harman, Joynext, Denso and Astemo alongside Qualcomm and Hyundai Mobis — all major Tier 1 suppliers serving global automakers. Micron said the long-term pacts improve production planning by providing visibility into future demand and establish commercial terms for supply commitments and pricing. The company disclosed 16 such strategic customer agreements during its fiscal third-quarter earnings call in June.

The automotive push comes as the Philadelphia Semiconductor Index has fallen 18 percent from its June peak after more than doubling over the past year, with 82 percent of fund managers calling semiconductors the most crowded trade in the market, according to Bank of America's July survey. UBS estimates hyperscaler capital expenditure will rise 76 percent to $673 billion this year but slow to 25 percent growth in 2027 and just 6 percent in 2028.

Why Cars Are Becoming Memory-Hungry

Intelligent vehicles require more advanced memory to support next-generation in-vehicle infotainment, advanced driver assistance systems (ADAS) and higher levels of in-vehicle intelligence, Micron said. The shift toward software-defined vehicle architectures — where features are updated over the air rather than fixed at manufacture — is driving demand for higher-bandwidth memory and storage.

Qualcomm Chief Executive Officer Cristiano Amon said future vehicle platforms will require the integration of high-performance compute, connectivity, memory and storage. Harman CEO Christian Sobottka added that resilient memory and storage are becoming essential for delivering intelligent in-cabin experiences at scale.

Micron is the only US manufacturer of high-bandwidth memory (HBM) chips, which are widely used in Nvidia's AI processors. The company's automotive push diversifies its end-market exposure beyond data centers, where AI-driven demand has lifted memory prices across the industry alongside competitors SK Hynix and Samsung Electronics.

Institutional Rotation Picks Up Pace

Some active fund managers have already cut exposure to semiconductor stocks and rotated into hyperscaler shares, software companies and sectors expected to benefit from AI adoption such as financials and healthcare.

Edmond de Rothschild Asset Management global equity portfolio manager Alexis Bossard said he has reduced semiconductor holdings, which he believes have become too expensive relative to expectations. "Once they stop increasing their capex, it will definitely be a relief for hyperscalers and a negative signal for the semi industry," he said.

LFG+ZEST Chief Investment Officer Alberto Conca has sharply cut positions in memory-chip and equipment makers while building positions in hyperscalers and healthcare stocks, backing that view with put options on selected semiconductor names. DWS senior portfolio manager Madeleine Ronner said she has taken some profits in semiconductor stocks after their strong run but remains overweight the sector.

Not all investors are bearish. Fidelity Investments Director of Global Macro Jurrien Timmer compared recent pullbacks to periodic corrections during the late-1990s internet rally, when leading stocks suffered repeated 20 percent to 30 percent declines before resuming their advance. "The AI story is well known, it's ongoing, the earnings are still supporting the trend," he said.

Still, chip-focused funds attracted a record $10 billion in net inflows through May, Morningstar data shows, suggesting retail and institutional appetite for the sector remains strong despite the rotation signals from active managers.

This article is for informational purposes only and does not constitute investment advice.