Shares of chipmaker Micron Technology (MU.O) experienced a 7% jump on Thursday following the company’s optimistic outlook, predicting a robust recovery in the supply-demand balance for memory and flash storage in 2024. Micron’s quarterly results, released on Wednesday, surpassed market expectations, signaling a positive trend in memory chip prices poised for improvement in the coming year after a prolonged downturn.
The company’s shares reached $85.99 on Thursday, marking a nearly 21-month peak. Micron’s stock has seen an approximately 60% increase this year, reflecting anticipation of a broader industry recovery. Micron reported that stock levels are at or near normal for most customers in various sectors, including personal computers, mobile, automotive, and industrial markets. Datacenter inventories are expected to approach these levels in the first half 2024. Morningstar analysts noted that market rebounds are occurring earlier than initially anticipated, echoing positive sentiments about the industry’s trajectory.
Micron’s strong performance for the quarter ending November 30 and its optimistic forecast has raised expectations for other chip companies set to report early next year. This has led to a 2% rise in the Philadelphia SE Semiconductor index (.SOX), driven by gains in shares of companies like Nvidia (NVDA.O), Advanced Micro Devices (AMD.O), Qualcomm (QCOM.O), Intel (INTC.O), and Broadcom (AVGO.O).
Micron also disclosed that it is in the “final stages” of qualifying its high-bandwidth memory chips for use in Nvidia’s powerful AI platforms. These high-end memory chips represent some of Micron’s most profitable products and are expected to generate “several hundred million” dollars in revenue in fiscal 2024.
Analysts anticipate the growing demand for AI-driven chips will contribute significantly to Micron’s rebound. Piper Sandler analysts, in a note, stated that the rising demand for such chips is likely to be a tailwind for Micron for at least the next two quarters and potentially longer.
Following Micron’s results, at least 12 brokerages raised their price targets, as reported by LSEG data. Micron’s forward price-to-earnings ratio stands at 32.45 for the next 12 months, compared to the industry average of 21.03, underscoring the positive market sentiment towards the company’s prospects.
