🥇 First rule of investing? Know when to save! Up to 55% off InvestingPro before BLACK FRIDAYCLAIM SALE

Micron shares surge after upbeat first-quarter forecast due to AI demand for memory chips

Published 09/25/2024, 04:08 PM
Updated 09/25/2024, 08:20 PM
© Reuters. The company logo is seen on the Micron Technology Inc. offices in Shanghai, China May 25, 2023. REUTERS/Aly Song/File Photo
MSFT
-
NVDA
-
MU
-
005930
-

By Harshita Mary Varghese

(Reuters) -Micron Technology shares surged roughly 14% in after-hours trading after the memory maker forecast higher than expected first-quarter revenue due to the thirst for its memory chips used in artificial intelligence computing.

Micron (NASDAQ:MU) is one of the only three providers of high-bandwidth memory (HBM) chips along with South Korea's SK Hynix and Samsung (KS:005930), which has allowed the U.S. firm to cash in on demand for semiconductors that help power generative AI technology.

HBM is a space-saving, power-efficient type of dynamic random access memory chip, or DRAM, crucial for AI-focused graphics processing units, that aid in processing vast amounts of data.

"Demand from data center customers continues to be strong and customer inventory levels are healthy," Micron CEO Sanjay Mehrotra said on a conference call with analysts.

The company said in June its HBM chips, used in the AI processors designed by Wall Street darling Nvidia (NASDAQ:NVDA), were sold out for the 2024 and 2025 calendar years with pricing already determined.

Micron expects to report record revenue of about $8.7 billion, plus or minus $200 million, in the first quarter and forecast a jump in gross margin to about 39.5% for the same period.

Analysts had expected revenue of $8.28 billion for the first quarter and adjusted gross margin of 37.7%, according to LSEG data.

The AI boom has also helped Micron cushion the hit from a memory chip inventory glut in PC and smartphone markets.

Personal computers infused with AI technologies are expected to have more memory chips, helping firms such as Micron.

AI PCs may have over 30% more DRAM and Microsoft (NASDAQ:MSFT)'s push to have users shifting to Windows 11 from an older version, may expand the market, especially for commercial PCs in 2025, said Summit Insights senior research analyst Kinngai Chan.

Micron's results typically set the tone for the chip sector as it reports ahead of peers and serves a broad client base spanning the PC, data center and smartphone industries.

© Reuters. The company logo is seen on the Micron Technology Inc. offices in Shanghai, China May 25, 2023. REUTERS/Aly Song/File Photo

"HBM, high capacity memory and data center flash storage, each of these three product categories will be multiple billions of dollars in revenue in 2025," Micron's Chief Business Officer Sumit Sadana said.

For the first quarter, the company forecast an adjusted profit of $1.74 per share, plus or minus 8 cents, compared with analysts' estimates of $1.65.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.