Computer memory and data storage specialist Micron Technology (NASDAQ:MU) generated headlines on Thursday morning when it announced a partnership with Terra-Gen, a leading developer of renewable energy. On paper, the agreement will help undergird Micron’s renewable energy integration ambitions. However, MU stock dipped around 3% in the afternoon hours, likely due to feasibility concerns associated with go-green initiatives, along with an overheated artificial intelligence (AI) market.
According to the accompanying press release, Micron signed a 15-year virtual power purchase agreement for its U.S. operations with Terra-Gen. Under the terms of the deal, Micron will receive about 178 megawatts (MW) of wind electricity capacity. As well, it will receive associated renewable energy certificates annually. Specifically, this contract will aid Micron’s U.S.-focused target to hit 100% renewable energy incorporate by the end of 2025.
Further, this agreement represents the latest milestone in Micron’s ambitions to achieve net zero greenhouse gas emissions by 2050.
Micron Executive Vice President of Global Operations Manish Bhatia emphasized the company’s progress toward fully integrating renewable energy sources. “Terra-Gen’s proven track record of building and operating efficient facilities, as well as the maturity of this particular wind project enables Micron to diversify our energy portfolio and to effectively manage our long-term energy costs in the U.S.,” added Bhatia.
MU Stock Possibly Hit with Feasibility and AI Hype Concerns
Although the recent disclosure should be a net positive for society, investors had other ideas. Not only did MU stock slip on Thursday, for the trailing five sessions, it’s down about 7%. At least some of the headwinds may be due to concerns that the AI-adjacent economy may be getting overheated. Additionally, feasibility regarding renewable energy initiatives may be clouding Micron.
For the latter, not everyone is buying the holistic benefits of fully sustainable energy ambitions. Yes, federal government data indicates that wind power specifically carries significant advantages, such as cost-effectiveness and job creation. At the same time, rising competition, installation challenges and wildlife impact stand among the disadvantages.
Moreover, even arguably left-leaning thinktanks like Brookings Institution question the substance behind the good intentions of “net zero” pledges. Essentially, the summary of the position is that, at best, go-green initiatives may be largely ineffective or inadequate. At worst, they may disadvantage poorer nations or create false impressions of positive environmental impact.
As for the red ink in MU stock, investors could be taking profits off the table as the AI hype machine soared over the past few months. Micron represents a powerful cog within the AI-adjacent economy, providing high-capacity memory and multi-chip packages to undergird various smart digitalization applications.
Since the start of the year, MU stock gained an impressive 29% of equity value.
Why It Matters
According to TipRanks, MU stock carries a consensus view of moderate buy. Against 24 total ratings within the past three months, 18 represent buys, suggesting broad optimism. However, some doubts have also crept in, with four holds and two sells. Overall, the experts’ average price target stands at $71.33, implying nearly 10% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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