Micron Shares Jump Following Positive First-Quarter Outlook Driven by AI Demand for Memory Chips, Reports Reuters

By Harshita Mary Varghese

Micron Technology’s shares surged approximately 14% in after-hours trading following the company’s forecast of higher-than-expected revenue for the first quarter, driven by increased demand for its memory chips utilized in artificial intelligence computing.

As one of only three suppliers of high-bandwidth memory (HBM) chips, alongside South Korea’s SK Hynix and Samsung, Micron is capitalizing on the soaring need for semiconductors that support generative AI technology.

HBM is a compact and energy-efficient type of dynamic random access memory (DRAM) vital for AI-focused graphics processing units, which play a significant role in processing large volumes of data.

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

In June, the company announced that its HBM chips, essential for the AI processors designed by Nvidia, were sold out for the 2024 and 2025 calendar years, with prices already set.

Micron anticipates reporting record revenue of around $8.7 billion, plus or minus $200 million, for the first quarter, along with a forecasted increase in gross margin to approximately 39.5%. Analysts had previously projected revenue of $8.28 billion for the same timeframe and an adjusted gross margin of 37.7%.

The boom in AI has also helped Micron mitigate the effects of a memory chip surplus in the personal computer and smartphone markets. AI-enabled personal computers are expected to incorporate more memory chips, benefiting companies like Micron.

AI PCs may include over 30% more DRAM, and Microsoft’s initiative to encourage users to upgrade to Windows 11 from older versions may further expand the market, especially for commercial PCs in 2025, according to Summit Insights senior research analyst Kinngai Chan.

Micron’s results often set the trajectory for the semiconductor sector, as it reports ahead of its competitors and caters to a diverse clientele across the PC, data center, and smartphone industries.

Micron’s Chief Business Officer, Sumit Sadana, noted, "HBM, high-capacity memory, and data center flash storage will each generate multiple billions of dollars in revenue by 2025."

For the first quarter, the company projects an adjusted profit of $1.74 per share, plus or minus 8 cents, compared to analysts’ expectations of $1.65.