Micron (NASDAQ:MU) stock surged above the $130 mark on Thursday, marking a new all-time high for the chipmaker. Driven by robust demand for its coveted high bandwidth memory (HBM) AI chips, the company’s shares are already up nearly 50% this year.
Micron stock surges as demand returns
The sharp rally in Micron stock began in March, when the company posted an unexpected quarterly profit and provided a third-quarter revenue forecast that exceeded expectations, capitalizing on the rapid adoption of artificial intelligence (AI).
The strong print once again underlined the growing demand for advanced memory chips and semiconductors as major technology firms increasingly integrate generative AI into their operations.
Micron's CEO, Sanjay Mehrotra, revealed that the company's HBM chips, crucial for developing sophisticated AI applications, are already sold out for 2024, with most of the supply for 2025 also allocated.
Remarkably, Nvidia (NASDAQ:NVDA), an AI darling and one of the biggest drivers of the ongoing stock market rally, has chosen Micron to supply the latest HBM 3E chips for its upcoming H200 graphics processing units (GPUs), marking a shift as SK Hynix had previously been Nvidia's exclusive supplier of HBM chips.
Sumit Sadana, Micron's chief business officer said Micron has also secured new customers for its HBM products, details of which are yet to be disclosed.
The earnings report ended a streak of five consecutive quarters of losses for Micron. Industry analysts expect the chipmaker to continue increasing its market share in the lucrative HBM sector throughout the year.
Micron's product line includes flash memory chips, catering to the data storage market, and dynamic random access memory (DRAM) chips, designed for data centers, personal computers, smartphones, and various computing devices.
Micron gains on news from Taiwan
Recent reports emerged about a magnitude 7.4 earthquake hitting Taiwan, the country where Micron manufactures 60% of its DRAM chips.
As reported by TrendForce, Micron has temporarily halted providing quotes for DRAM contracts for the second quarter of 2024, a move that was also followed by SK Hynix and Samsung (KS:005930).
Commenting on this move, Citi Research analysts said it “could be positive for DRAM since there likely will be some inventory scrappage, leading to less supply.”
They also think that the earthquake is likely to raise the possibility of a double-digit average selling price (ASP) increase in Q2 2024.
Citi acknowledged that a shutdown could lead to lower revenues in the current quarter “but only temporarily”
Analysts reiterated Micron stock as their top pick, with a target price of $150.
MU stock to consolidate - analyst
Katie Stockton, a Founder and Managing Partner of Fairlead Strategies, told Investing.com that she sees signs of exhaustion in Micron stock.
While the stock has demonstrated notable positive momentum recently, with its performance strengthening across various time frames.
However, for the first time, a short-term counter-trend signal was observed yesterday, per DeMARK Indicators, “supporting at least two weeks of consolidation,” Stockton said.
Accordingly, the initial support for Micron stock is the gap that is located around the $109 mark.