Micron Technology (MU.O) witnessed a surge to a record high on Thursday following its robust revenue forecast, sparking optimism about the company’s prospects amid soaring demand for AI hardware. The stock soared by 15%, driving the broader Philadelphia chip index (.SOX) up by 3%. As a significant supplier to Nvidia, Micron’s performance often serves as an indicator of broader semiconductor demand.
The company revealed on Wednesday that its high-bandwidth memory (HBM) chips, crucial components in AI applications, have been sold out for the entirety of 2024, with a significant portion of its 2025 supply already allocated. This announcement fueled expectations of a substantial uptick in revenues, with industry experts projecting a 55% growth in 2024 and a further 35% in 2025.
Mark Haefele, chief investment officer at UBS Global Wealth Management, emphasized the pivotal role of memory in AI adoption, expressing confidence in a rapid recovery for the industry. Micron, a key player in the HBM chip market alongside South Korea’s SK Hynix, is poised to see a significant increase in its market value, estimated at nearly $16 billion based on its current share price.
Despite trading at approximately 24 times its 12-month forward earnings estimates ahead of the results, Micron’s performance continues to outshine smaller rivals like Western Digital, boasting a more favorable outlook among investors. Over the past year, Micron’s shares have surged by over 60%, driven by expectations of expanding its share in the high-margin HBM market.
Sumit Sadana, Micron’s chief business officer, revealed that the company has secured new customers for its HBM products, a development yet to be officially announced. Moreover, Micron’s current-quarter forecast for adjusted gross margin surpasses market estimates, underscoring the company’s pricing power amid tight supply conditions and increasing demand for HBM chips.
Analysts at Piper Sandler highlighted the convergence of factors contributing to Micron’s favorable outlook, including supply constraints, rising demand, inventory normalization, and the growing size of the HBM market. These dynamics are expected to drive significant improvements in pricing, further bolstering Micron’s position in the semiconductor industry.