Shares of Boise, Idaho-based semiconductor manufacturer Micron Technology Inc. (MU) plummeted Thursday morning following a downbeat note from one team of analysts on the Street that expect the red-hot chip stock to lose ground after surging to its highest level since the dot-com bust.  (See also: How to Hedge a Plunge in Chip Stocks.)

The largest U.S. maker of memory chips added roughly $20 billion to its total market capitalization in May, soaring about 37% before this week's sell-off, with the stock on track for its best monthly performance since 2009. The DRAM and NAND chipmaker's rally was partially fueled by better-than-expected earnings results and a $10 billion share buyback plan. Trading down 5.6% on Thursday morning at $59.07, MU reflects a 43.8% gain year-to-date (YTD) and a 91.6% return over 12 months, sharply outperforming the S&P 500's 1.6% increase and 12.6% growth over the same respective periods. 

Erring on Side of Caution

On Thursday, Morgan Stanley wrote a note to clients downgrading MU stock from overweight to equal weight, citing its fully priced valuation. Analyst Joseph Moore wrote that, after being bullish on memory for the last two years, the firm is taking more of a neutral stance. "We would rather err on the side of caution in an environment where we can see storm clouds on the horizon," wrote the analyst, noting that conversations with industry contacts signal a less meaningful seasonal rebound for memory. Moore reiterated his $65 12-month price target for MU shares. 

Moore's downbeat report contrasts to a note from bulls at Argus Research on Tuesday in which analysts applauded Micron for remaking itself into a "DRAM and NAND powerhouse," and transitioning from a value investment to a growth play. "We recommend that investors use any weakness in the share price or in the overall market as an opportunity to add to or initiate positions," wrote Argus. (See also: Micron to Gain on Strong NAND-DRAM Trends.)

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