Micron rises 13 Percent as strong forecast impresses AI-hungry investors

Micron rises 13 Percent as strong forecast impresses AI-hungry investors/Reuters

Reuters | September 26, 2024 | 10:54 PM IST | Breaking News | Follow on Google News

Micron rises 13 Percent as strong forecast impresses AI-hungry investors

Micron rises 13 Percent as strong forecast impresses AI-hungry investors

Sept 26 (Reuters) – Micron Technology (MU.O), opens new tab surged more than 13% on Thursday, after its first-quarter revenue forecast indicated strong demand and pricing for the high-bandwidth memory chips (HBM) used to support booming generative artificial intelligence technology.

The company, an Nvidia supplier (NVDA.O), opens new tab, was on track to add more than $14 billion to its market capitalization.

Micron delivered its best quarterly revenue growth in a decade in the fourth quarter ended Aug. 29 and its forecast for the current period came in widely above Wall Street estimates.

“If Micron, one of the higher-cost memory providers, is bullish on the market, it bodes well for all of AI and tech,” said Ryan Detrick, chief market strategist at Carson Group.

The forecast drove up shares of other chip firms earlier in the day, but they pared gains after a media report said the U.S. Department of Justice was probing server maker Super Micro Computer (SMCI.O), opens new tab.

Super Micro, a big customer of chipmakers, resells and employs their products in its servers. Shares of Nvidia, Intel (INTC.O), opens new tab and Broadcom (AVGO.O), opens new tab gave up earlier gains of more than 2% to trade only slightly higher.

Qualcomm (QCOM.O)
, opens new tab and AMD (AMD.O)
, opens new tab were up about 2%. The Philadelphia Semiconductor Index (.SOX)
, opens new tab trimmed its gains to trade 2% higher, after rising more than 4% earlier in the day.

The bar for Micron was relatively lower this earnings cycle, analysts said. Concerns HBM pricing was weakening due to rising supply had weighed on the stock ahead of the report, with Micron’s shares losing more than 20% over the last three months

With those fears allayed, strong HBM pricing is now expected to help Micron’s gross margins after an expensive ramp-up of its manufacturing capacity for the chips.

The company’s expectations for first-quarter adjusted gross margin were above estimates. It also saw a big improvement in adjusted gross margin in the fourth quarter to 36.5%.

“It’s clear that the AI gravy train hasn’t run out of steam as customers including Nvidia have been queuing up for Micron’s HBM chips,” said Dan Coatsworth, investment analyst at AJ Bell.

“Big demand equals big prices, helping Micron smash margin expectations.”

Reuters