Micron (MU) shares jumped 17% before the close Thursday after the chipmaker forecast higher-than-expected revenue for the next quarter.
Micron forecast first-quarter revenue of $8.5 billion to $8.9 billion, higher than the $8.3 billion analysts had expected.
Company executives attributed the revised forecast to a more favorable pricing environment and strong demand for Micron’s memory chips used in data centers to power artificial intelligence.
“With the advent of artificial intelligence, we are in the most exciting period I have seen in memory and storage in my career,” CEO Sanjay Mehrotra said on a conference call with investors Wednesday afternoon. Mehrotra said the company is entering fiscal 2025 with “the strongest competitive positioning in Micron’s history.”
Executives now expect the market for high-bandwidth memory chips used in AI data centers to reach $25 billion in 2025, up from $5 billion this year — and for increased demand for its HBM chips to bring in billions of dollars next year.
Analysts at Wedbush, JPMorgan, TD Cowen and Raymond James reiterated their outperform ratings on the stock, encouraged by Micron’s comments on demand for AI and the recovery in its more traditional markets. For example, they pointed to the recovery in demand for Micron memory chips from PC and smartphone makers.
Wedbush’s Matt Bryson said Micron’s first-quarter outlook “reflects very well our belief that overall memory dynamics are likely to improve significantly” after early next year.
Raymond James analysts said: “Demand for HBM continues to be strong and Micron appears on track to meet its targets.”
Micron is the first chipmaker to report quarterly results this earnings season, and its report provides an early look at how the semiconductor industry is faring amid strong expectations from Wall Street.
The company reported revenue of $7.75 billion in its fiscal fourth quarter ended Aug. 29, up 93% from a year ago and topping the $7.66 billion expected by analysts, who had recently lowered their expectations. Adjusted earnings per share of $1.18 also beat both the high end of Micron’s forecast and Wall Street’s $1.11 forecast.
Micron’s memory chip business has seen renewed interest over the past year as big tech companies pour billions into the semiconductor sector for hardware to power AI data centers.
Micron stands out for its partnership with industry superpower Nvidia (NVDA), rather than its competition. Micron supplies memory chips for Nvidia’s highly sought-after GPUs.
Investors have extremely high and rising expectations for AI chipmakers, which has often disappointed them in recent months. Micron’s above-average third-quarter results failed to resonate with investors in late June, and shares fell on its fourth-quarter outlook, which was right in line with Wall Street’s expectations (rather than beating them).
Nvidia shares also fell after reporting quarterly results in late August. Despite more than doubling profits and beating sales expectations, investors had expected more from the semiconductor superpower.
Nvidia has since rebounded, and Micron’s fourth-quarter results sent its stock higher after a disappointing few months that saw shares fall from highs of $150 in mid-June.
The PHLX Semiconductor Sector Index (^SOX) has started to recover from a decline earlier this month as technology stocks rebounded after the U.S. Federal Reserve cut interest rates sharply and China’s central bank’s massive stimulus package. The index is up nearly 6% over the past week.
The company also stands to benefit from a bill pending President Joe Biden’s signature that would ease environmental requirements for microchip projects funded by the CHIPS and Science Act. Micron is a major recipient of CHIPS Act funding, and the Building Chips in America Act, passed by the U.S. House of Representatives on Monday, would give it faster access to funding for its projects in Idaho and New York.
Laura Bratton is a reporter for Yahoo Finance.
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