Key Points
- Micron Technology’s stock surged over 13% following the strong revenue forecast, driven by demand for HBM chips used in AI.
- The company’s market cap is set to rise by $14 billion, with its forecast exceeding Wall Street expectations.
- Concerns over HBM pricing have eased, helping Micron’s gross margins after expanding its chip manufacturing.
- Shares of other chipmakers saw initial gains but pared back after news of a U.S. DOJ investigation into Super Micro Computer.
Micron Technology’s stock surged over 13% on Thursday, following a strong first-quarter revenue forecast driven by high demand and pricing for its high-bandwidth memory (HBM) chips. These chips are essential for powering generative artificial intelligence (AI) systems. The company’s HBM chips are particularly crucial for companies like Nvidia, which uses them to support AI technologies.
Thanks to the positive earnings outlook, Micron, an Nvidia supplier, is set to add more than $14 billion to its market capitalization. For the fourth quarter, which ended on August 29, the company delivered its strongest quarterly revenue growth in a decade. Its forecast for the current period exceeded Wall Street expectations, reinforcing market confidence in its AI-related business.
“If Micron, one of the higher-cost memory providers, is optimistic about the market, it bodes well for all of AI and tech,” said Ryan Detrick, chief market strategist at Carson Group. The optimistic forecast also fueled shares of other chipmakers earlier in the day. However, gains were tempered after a media report revealed that the U.S. Department of Justice was investigating server maker Super Micro Computer (SMCI.O), a significant client of chip manufacturers.
Shares of major tech firms like Nvidia, Intel, and Broadcom initially rose by more than 2% but later gave up much of their gains. Still, Qualcomm and AMD managed to hold onto about 2% gains. The Philadelphia Semiconductor Index (.SOX) trimmed its earlier rise of 4%, settling for a 2% increase by the end of the day.
The strong performance was a relief for Micron, which had faced concerns earlier about weakening HBM pricing due to increasing supply. These concerns had dragged the company’s stock down by more than 20% over the last three months. With these fears now alleviated, analysts expect solid HBM pricing to boost Micron’s gross margins after the company’s costly expansion of manufacturing capacity for the chips.
Micron’s expectations for its first-quarter adjusted gross margin also exceeded estimates, and the company reported a significant improvement in adjusted gross margin for the fourth quarter, reaching 36.5%.
AJ Bell investment analyst Dan Coatsworth said, “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.”
