Micron Surges 13% on Impressive Forecast that Excites AI-Hungry Investors, According to Reuters

By Arsheeya Bajwa

Micron Technology experienced a remarkable surge, climbing over 13% on Thursday following a first-quarter revenue forecast that highlighted robust demand and pricing for high-bandwidth memory chips (HBM), essential for the rapidly growing generative artificial intelligence sector.

As a supplier for Nvidia, Micron was poised to add more than $14 billion to its market capitalization. The company reported its strongest quarterly revenue growth in a decade for the fourth quarter ended August 29, with its forecast exceeding Wall Street expectations significantly.

Ryan Detrick, chief market strategist at Carson Group, commented, "If Micron, one of the higher-cost memory providers, is optimistic about the market, it reflects positively for all of AI and tech."

The positive forecast initially boosted shares of other semiconductor companies; however, gains were reduced after reports emerged about the U.S. Department of Justice investigating Super Micro Computer, a major server manufacturer. This company is a significant customer for chipmakers, utilizing their products within its servers. As a result, stocks of Nvidia, Intel, and Broadcom, which had all risen more than 2%, saw their gains diminish.

Qualcomm and AMD saw gains of about 2% each. The Philadelphia Semiconductor Index, after peaking with a 4% increase earlier in the day, settled to trade 2% higher.

Analysts noted that the expectations for Micron were not as high this earnings cycle. There had been concerns regarding declining HBM prices due to increased supply, which had affected stock performance, causing a decline of over 20% in Micron’s shares over the past three months. With those worries now alleviated, strong HBM pricing is anticipated to enhance Micron’s gross margins, particularly following a costly expansion of its manufacturing capacity for these chips.

Micron’s projections for first-quarter adjusted gross margins surpassed estimates, and an improvement in adjusted gross margin to 36.5% was recorded in the fourth quarter.

Dan Coatsworth, an investment analyst at AJ Bell, remarked, "It’s clear that the AI gravy train hasn’t run out of steam, as customers, including Nvidia, have been eagerly seeking Micron’s HBM chips. High demand translates to high prices, allowing Micron to exceed margin expectations."