Shares of Micron (MU) plunged more than 17% early Thursday as forecasts for the current quarter came in weaker than expected despite growing demand for AI chips.

The memory chip maker, which counts Nvidia (NVDA) among its major customers, said Wednesday that it expects revenue between $7.7 billion and $8.1 billion for the quarter. According to Bloomberg consensus estimates, Wall Street analysts had expected sales of $9 billion.

Micron’s outlook points to a trend seen across the chip industry: sales of artificial intelligence semiconductors are growing rapidly, while sales of traditional chips are declining.

Micron’s high-bandwidth memory (HBM) chips are used in Nvidia’s latest Blackwell GPUs (graphics processing units), which are then used in data centers by hyperscalers to power both their customers’ workloads and their own artificial intelligence workloads to operate. Blackwell demand is expected to surge in the coming year.

Sanjay Mehrotra, CEO of Micron Technology, said in a statement on Wednesday that data center revenue, which includes Micron’s memory chips used in GPUs, rose to more than for the first time in the fiscal first quarter ended Nov. 28 50% of the company’s total sales increased. Meanwhile, “its consumer-facing markets are weaker in the near term.”

For example, Micron said that while HBM chips rose more than 50% in the November quarter, sales of chips for mobile phones fell 19%.

Mehrotra said Micron is “extraordinarily well positioned to leverage AI-driven growth to create significant value for all stakeholders.”

Bank of America analyst Vivek Arya downgraded the stock to Neutral from Buy on earnings results and outlook. Arya said Micron’s growing revenue from sales of its AI memory chips is not enough to offset pressure from weak demand for chips for PCs and smartphones.

Analysts at investment firms such as JPMorgan (JPM), Raymond James (RJF) and TD Cowen also lowered their price targets on the stock but maintained their Buy rating.

While Micron said weak demand in the PC market is taking longer than expected, the company pointed to a growing AI market opportunity for its high-bandwidth memory semiconductors used in AI chips such as Nvidia’s GPUs . Micron forecasts the market for HBM will grow to $30 billion in 2025, up from its previous forecast of $25 billion. The chipmaker expects its own HBM sales to rise from several hundred million in fiscal 2024 to several billion dollars in 2025.

Krish Sankar, analyst at TD Cowen, said in a note on Thursday: “Perhaps what was most surprising was not MU’s guidance, but the stock reaction AH (post-market) given the well-understood weakness in short-term storage prices.” Sankar reiterated his buy rating on the stock, but lowered its price target to $125 from $135.

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