Micron Technology’s stock has experienced a remarkable surge, climbing by 17% in pre-market trading on Thursday, following an impressive revenue forecast for the upcoming quarter that exceeds analysts’ expectations. The semiconductor giant projected first-quarter revenues between $8.5 billion and $8.9 billion, surpassing the $8.3 billion that analysts had anticipated.
Company executives attribute this optimistic outlook to a bolstered pricing environment and strong demand for Micron’s memory chips, particularly those used in data centers powering artificial intelligence (AI) applications. CEO Sanjay Mehrotra shared his enthusiasm, stating, “We are witnessing a transformative era for memory and storage driven by AI, making this the most exhilarating time in my career.” He elaborated that Micron is beginning its fiscal year 2025 with unparalleled competitive strength.
The market for high-bandwidth memory (HBM) chips, which are essential for AI data centers, is projected to soar to $25 billion by 2025, a significant increase from just $5 billion this year. This surge in demand for HBM chips is expected to contribute billions in revenue to Micron next year alone.
Industry analysts from Wedbush, JPMorgan, TD Cowen, and Raymond James have reaffirmed their Outperform ratings for Micron, bolstered by the company’s remarks about the growing demand for AI and stabilization in its traditional markets. Matt Bryson from Wedbush commended Micron’s outlook, suggesting that the overall memory market dynamics are likely to see significant improvement starting early next year, while Raymond James pointed out the persistent strength in HBM demand, indicating that Micron is well-positioned to meet its ambitious goals.
Being the first semiconductor company to report quarterly results this season, Micron’s performance provides an initial glimpse of the semiconductor sector’s trajectory amidst soaring Wall Street expectations. In its fiscal fourth quarter, which ended on August 29, Micron recorded revenues of $7.75 billion—an impressive 93% increase year-over-year—and exceeded the anticipated $7.66 billion. Additionally, the company achieved an adjusted earnings per share of $1.18, surpassing both its own guidance and the $1.11 forecasted by market analysts.
Micron’s revival in the memory chip sector has emerged in conjunction with major technology firms increasing their investments in semiconductors to support AI data centers. Unique in its strategy, Micron focuses on collaboration with superpower Nvidia, supplying memory chips for the in-demand GPUs that Nvidia manufactures.
As further validation of this trend, Micron recently pledged an investment of up to $100 billion over the next two decades to establish a new manufacturing plant in upstate New York, potentially creating thousands of new jobs. This strategic move is poised to enhance Micron’s manufacturing capacity and significantly bolster its market presence.
Despite the high expectations from investors in the AI chip sector, which have led to disappointment in some cases, Micron has positioned itself favorably. After a challenging summer, when its stock fell from mid-June highs in the $150 range due to a lackluster fourth-quarter outlook, the recent results reignited investor confidence. Additionally, the PHLX Semiconductor Sector Index has begun to recover, with many tech stocks bouncing back after recent Federal Reserve monetary policy adjustments and stimulus measures from the Chinese central bank.
Micron is also likely to benefit from new legislation awaiting President Biden’s signature, which aims to ease environmental regulations related to microchip projects backed by the CHIPS and Science Act. Given that Micron is a significant recipient of CHIPS Act funding, the proposed Building Chips in America Act would facilitate access to funding for various projects in Idaho and New York.
In summary, Micron Technology’s optimistic guidance, driven by robust demand for AI-related memory chips and a supportive market environment, positions the company for substantial growth in the coming years. As investors eagerly anticipate these developments, Micron stands at the forefront of a booming semiconductor industry, ready to capitalize on the next wave of technological advancement.