Micron Technology’s Stock Surge

By Harshita Mary Varghese

(Reuters) – Micron Technology 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 (NASDAQ: MU) is one of only three providers of high-bandwidth memory (HBM) chips, along with South Korea’s SK Hynix and Samsung (KS: 005930), allowing the U.S. firm to capitalize on the demand for semiconductors that 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 help process vast amounts of data.

“Demand from data center customers continues to be strong, and customer inventory levels are healthy,” Micron CEO Sanjay Mehrotra said on a conference call with analysts.

The company stated in June that its HBM chips, used in AI processors designed by the popular Nvidia (NASDAQ: NVDA), 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 forecasts 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 an adjusted gross margin of 37.7%, according to LSEG data.

The AI boom has also helped Micron cushion the impact from a memory chip inventory glut in PC and smartphone markets.

Personal computers infused with AI technologies are expected to have more memory chips, benefiting firms such as Micron.

AI PCs may contain over 30% more DRAM, and Microsoft’s (NASDAQ: MSFT) push for users to shift 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 its peers and serves a broad client base spanning the PC, data center, and smartphone industries.

“HBM, high capacity memory, and data center flash storage, each of these three product categories will generate multiple billions of dollars in revenue by 2025,” Micron’s Chief Business Officer Sumit Sadana noted.

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.