Micron Technology‘s stock surged by 14% in after-hours trading following an optimistic first-quarter forecast driven by strong demand for memory chips used in artificial intelligence (AI) computing. The company projects revenue of approximately $8.7 billion, surpassing analysts’ expectations of $8.28 billion. Additionally, Micron expects gross margins to rise to 39.5%, higher than the 37.7% analysts had anticipated.
Micron is one of three key providers of high-bandwidth memory (HBM) chips, alongside South Korea’s SK Hynix and Samsung. These chips, critical for AI-driven graphics processing units, are in high demand, especially for generative AI technology. Micron’s HBM chips, integral to AI processors made by Nvidia, are already sold out through 2024 and 2025, with prices set.
Sanjay Mehrotra, Micron’s CEO, highlighted continued strong demand from data center customers and healthy inventory levels. As AI technologies become embedded in personal computers, the demand for memory chips, including DRAM, is set to grow. Kinngai Chan, senior research analyst at Summit Insights, noted that AI PCs are expected to require 30% more DRAM by 2025. Additionally, Microsoft’s push to transition users to Windows 11 may boost the market for commercial PCs.
Micron’s first-quarter earnings outlook includes an adjusted profit forecast of $1.74 per share, exceeding the $1.65 predicted by analysts. The AI boom has helped the company navigate challenges in other sectors, such as the PC and smartphone markets, where memory chip inventories have been affected.
Sumit Sadana, Micron’s Chief Business Officer, emphasized that HBM, high-capacity memory, and data center flash storage are expected to generate billions in revenue by 2025. Micron’s results, often reported ahead of industry peers, set the tone for the broader chip sector.
Featured Image courtesy of Nikkei Asia
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