Micron shares surge after upbeat first-quarter forecast due to AI demand for memory chips.
Micron Technology (MU.O), opens new tab shares surged roughly 14% in after-hours trading after the memory maker forecast higher than expected first-quarter revenue due to the thirst for its memory chips used in artificial intelligence computing.
Micron is one of the only three providers of high-bandwidth memory (HBM) chips along with South Korea’s SK Hynix (000660.KS), opens new tab and Samsung (005930.KS), opens new tab, which has allowed the U.S. firm to cash in on demand for semiconductors that help power generative AI technology.
HBM is a space-saving, power-efficient type of dynamic random access memory chip, or DRAM, crucial for AI-focused graphics processing units, that aid in processing vast amounts of data.
Sanjay Mehrotra, Micron CEO, on a conference call with analysts, said:
Demand from data center customers continues to be strong and customer inventory levels are healthy.
The company said in June its HBM chips, used in the AI processors designed by Wall Street darling Nvidia (NVDA.O), opens new tab, were sold out for the 2024 and 2025 calendar years with pricing already determined.
Micron expects to report record revenue of about $8.7 billion, plus or minus $200 million, in the first quarter and forecast a jump in gross margin to about 39.5% for the same period.
Analysts had expected revenue of $8.28 billion for the first quarter and adjusted gross margin of 37.7%, according to LSEG data.
The AI boom has also helped Micron cushion the hit from a memory chip inventory glut in PC and smartphone markets.
Personal computers infused with AI technologies are expected to have more memory chips, helping firms such as Micron.
AI PCs may have over 30% more DRAM and Microsoft’s push to have users shifting to Windows 11 from an older version, may expand the market, especially for commercial PCs in 2025, said Summit Insights senior research analyst Kinngai Chan.
Micron’s results typically set the tone for the chip sector as it reports ahead of peers and serves a broad client base spanning the PC, data center and smartphone industries.
Sumit Sadana, Micron’s Chief Business Officer, said:
HBM, high capacity memory and data center flash storage, each of these three product categories will be multiple billions of dollars in revenue in 2025.
For the first quarter, the company forecast an adjusted profit of $1.74 per share, plus or minus 8 cents, compared with analysts’ estimates of $1.65.
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Micron shares surge after upbeat first-quarter forecast due to AI demand for memory chips. source
