Micron Technology Soars on Strong Forecast

By Arsheeya Bajwa

(Reuters) – Micron Technology surged more than 13% on Thursday after its first-quarter revenue forecast indicated strong demand and pricing for high-bandwidth memory chips (HBM) used in booming generative artificial intelligence technology.

The company, a supplier to Nvidia (NASDAQ:NVDA), was on track to add over $14 billion to its market capitalization.

Micron (NASDAQ:MU) experienced its best quarterly revenue growth in a decade for the fourth quarter ended August 29, and its current period forecast exceeded Wall Street estimates.

“If Micron, one of the higher-cost memory providers, is bullish on the market, it bodes well for all of AI and tech,” stated Ryan Detrick, chief market strategist at Carson Group.

This forecast positively affected shares of other chip firms initially, but they lost some gains after reports emerged about a U.S. Department of Justice probe into Super Micro Computer (NASDAQ:SMCI), a significant customer of chipmakers that resells their products in its servers. Shares of Nvidia, Intel (NASDAQ:INTC), and Broadcom (NASDAQ:AVGO) pulled back from earlier gains exceeding 2%.

Qualcomm (NASDAQ:QCOM) and AMD (NASDAQ:AMD) gained around 2%. The Philadelphia Semiconductor Index reduced its gains to about 2% after earlier rising more than 4%.

Analysts noted that the expectations for Micron were relatively lower in this earnings cycle. Concerns about weakening HBM pricing due to rising supply had previously impacted the stock, with Micron’s shares declining over 20% in the past three months.

With those concerns alleviated, strong HBM pricing is now anticipated to enhance Micron’s gross margins following an expensive expansion of its manufacturing capacity for the chips.

The company’s forecast for first-quarter adjusted gross margin was above estimates, and it saw substantial improvement in its adjusted gross margin to 36.5% in the fourth quarter.

“It’s clear that the AI gravy train hasn’t run out of steam as customers including Nvidia have been queuing up for Micron’s HBM chips,” stated Dan Coatsworth, an investment analyst at AJ Bell.

“Big demand equals big prices, helping Micron smash margin expectations.”