Micron’s Shares Surge on Strong AI Demand and Optimistic Forecasts
Micron, a leading semiconductor manufacturer, has witnessed a substantial increase in its stock prices following the release of its quarterly earnings report, which exceeded market expectations and indicated strong demand for memory chips used in artificial intelligence (AI) applications.
Today, Micron reported our Q4 FY24 financial results – highlighting 93% year-over-year revenue growth in fiscal Q4, as robust #AI demand drove a strong ramp of Micron data center DRAM products and industry-leading high bandwidth memory. Learn more: https://t.co/y3POMY1j3fpic.twitter.com/HlKMTkBQnD
Micron’s shares surged by nearly 15% after the company announced its projections for the upcoming fiscal first quarter. The firm anticipates earnings between $1.46 and $1.60 per share, with revenues expected to fall between $8.5 billion and $8.9 billion, significantly surpassing Wall Street estimates of $8.3 billion. The upbeat forecast reflects a thriving demand for semiconductors, particularly for those powering AI software.
President and CEOSanjay Mehrotra expressed confidence in the company’s positioning, stating, “We are entering fiscal 2025 with the best competitive positioning in Micron’s history.” He added that this optimistic outlook is bolstered by what he described as “the most exciting period that I have seen for memory and storage in my career.”
Resurgence in Revenue
Micron reported a 93.3% year-on-year increase in revenue for its fourth quarter, reaching $7.75 billion and exceeding the consensus estimate by $100 million. The adjusted earnings per share of $1.18 also surpassed analysts’ expectations by $0.07. Furthermore, the company’s adjusted gross margin stood at 36.5%, outpacing the projected 34.7%.
Reflecting on the market dynamics, Hans Mosesmann, a top-ranked analyst, noted, “Micron’s unambiguous beat and raise last night surprised even us.” He highlighted the strength in demand from data centres driven by AI needs, stating that traditional concerns regarding inventory levels in the smartphone and PC sectors were overshadowed by the “once-in-a-generation” demand for high-bandwidth memory (HBM) chips.
Analyst Optimism
The bullish sentiment extends beyond Micron’s immediate financial performance. Analysts from firms like Wedbush, JPMorgan, and Raymond James reiterated their Outperform ratings, driven by Micron’s positive comments regarding AI demand and a recovering market for traditional memory products. The anticipated growth for HBM chips used in AI data centres is projected to increase dramatically from $5 billion this year to $25 billion by 2025.
Mosesmann raised his price target for Micron to a new Street-high of $250, implying a potential upside of 129% from its current price of $151.54. With 24 Buy ratings against just one Hold and one Sell, Micron is currently viewed as a Strong Buy among analysts.
Broader Market Context
Micron’s impressive earnings report marks the beginning of the earnings season for the semiconductor sector and offers a glimpse into the health of the industry amid increasing expectations from investors. This performance aligns with a broader recovery in the PHLX Semiconductor Sector Index, which has risen nearly 6% in recent days, buoyed by external factors such as interest rate adjustments and stimulus measures in China.
Additionally, the potential for government support through the CHIPS and Science Act enhances Micron’s prospects, allowing the company to expedite its projects in Idaho and New York. This legislative backing positions Micron to capitalise on the growing demand for semiconductor technology.
Conclusion
Micron Technology’s latest financial results reflect a robust demand for its memory chips, particularly in the AI sector, signalling a positive trajectory for the company as it enters fiscal 2025. With strong guidance and favourable market conditions, Micron is well-positioned to capitalise on the booming semiconductor landscape.
