Micron Technology, the leading computer memory chip manufacturer in the United States, witnessed a significant uptick in its share price during after-hours trading, following a revenue forecast that exceeded analysts’ expectations. This optimistic projection for the fiscal third quarter is largely attributed to the rising demand for artificial intelligence (AI) hardware.
The company anticipates revenue to be between $6.4 billion and $6.8 billion for the upcoming quarter, surpassing the average analyst forecast of $5.99 billion. Additionally, Micron predicts earnings of approximately 45 cents per share, excluding certain items, which is almost double the analysts’ expectation of 24 cents.
Emerging from a challenging period marked by a downturn in demand for personal computers (PCs) and smartphones, Micron and its competitors are now seeing a resurgence. The burgeoning AI market is playing a significant role in this recovery, presenting new growth and profitability opportunities for chip manufacturers. “We believe Micron is one of the biggest beneficiaries in the semiconductor industry of the multiyear opportunity enabled by AI,” stated CEO Sanjay Mehrotra.
Following the announcement, Micron’s shares surged by 15% in late trading. The company’s stock has already seen a 13% increase to $96.25 this year.
Mehrotra has set high expectations for the industry’s future, forecasting a rebound in 2024 and record sales levels in 2025. A key factor in achieving these goals is the production of ultrafast memory compatible with Nvidia chips, which are crucial for data center operators developing AI software.
High-bandwidth memory (HBM) chips, particularly a new variant known as HBM3E, are central to AI systems. These chips are less commoditized, allowing manufacturers like Micron to command higher prices. Micron reported its initial revenue from HBM3E memory in the recent quarter and anticipates several hundred million dollars in revenue from HBM products in fiscal 2024, with the majority of its production already sold out for 2025.
The development of AI software heavily relies on memory due to the extensive information processing involved. To prevent bottlenecks and maximize processor efficiency, Micron and its peers have engineered memory chips that facilitate faster communication with other components.
For the second quarter ending February 29, Micron reported a 58% increase in revenue to $5.82 billion, with earnings of 42 cents per share, excluding certain items. This performance surpassed the expected sales of $5.35 billion and defied predictions of a 24-cent loss per share. “Micron has returned to profitability and delivered a positive operating margin a quarter ahead of expectation,” Mehrotra highlighted in an analyst call.
Competing with global giants like South Korea’s Samsung Electronics and SK Hynix, Micron produces short-term memory chips for computers and phones, as well as flash memory for longer-term storage. Despite the interchangeability of these memory types, market volatility and price fluctuations remain challenges.
Micron aims to diversify its market presence beyond PCs and smartphones to mitigate demand fluctuations. However, the company is also hopeful for a resurgence in steady orders from these core markets after a period of inventory adjustment led to reduced demand and pressured chip prices last year.
On the same day, the US Department of Commerce announced substantial grants and loans to Intel for semiconductor factory expansions in the US, marking a significant move under the Biden administration’s Chips and Science Act. Micron has outlined a budget of $7.5 billion to $8 billion for new plants and equipment in fiscal 2024, with projects planned in China, Japan, and India. The company emphasized the necessity of sufficient governmental support to make US expansions competitive with overseas projects.
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