Micron soars after AI-fuelled sales forecast shatters estimates

[SEATTLE] Micron Technology, the largest US maker of computer memory chips, surged in late trading after its quarterly sales forecast crushed Wall Street estimates, signalling that an artificial intelligence-fuelled growth run remains strong.

Revenue will be approximately US$50 billion in the fiscal fourth quarter, which runs through August, the company said in a statement Wednesday (Jun 24). Analysts estimated US$43.2 billion on average. Excluding some items, profit will be about US$31 a share, compared with a projection of US$25.31.

The shares climbed about 16 per cent in late trading after the report was released. They had already more than tripled this year, outpacing all other major chip stocks.

Micron delivered the results at a delicate moment for the AI industry. Shares of chipmakers and other technology companies had been hammered in recent days on fears that a spending boom was faltering. Wall Street was looking to Micron for reassurance, and the upbeat outlook is poised to lift the shares of chip peers. 

Micron and its peers in the memory space – Samsung Electronics and SK Hynix – have become major beneficiaries of the AI infrastructure build-out. A spending spree by data centre operators has stoked the appetite for both conventional memory and a newer variety called high-bandwidth memory, or HBM, that works with AI systems.

The companies have struggled to satisfy memory-chip demand, creating shortages in areas like computers, phones and cars. Though Micron is expanding its manufacturing capacity, prices are expected to remain high for the foreseeable future. 

Chief executive officer Sanjay Mehrotra said on a conference call with analysts that there was “no line of sight” to when supply will catch up with demand. The situation will persist beyond calendar 2027, he said, adding that availability of memory chips may improve gradually in 2028. 

For the fiscal third quarter, which ended May 28, sales rose to US$41.5 billion. Earnings climbed to US$25.11 a share. Analysts on average had estimated US$35.7 billion in revenue and US$20.49 a share in profit.

In another sign of Micron’s widening profitability, its adjusted gross margin more than doubled to 84.9 per cent last quarter. Analysts had estimated 81.9 per cent for that measure, the percentage of sales remaining after deducting production costs. 

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Micron works with Nvidia, the largest maker of AI processors, to integrate its memory into AI infrastructure. Earlier this month, Nvidia chief executive officer Jensen Huang confirmed that his company will rely on Micron’s HBM4 memory, along with those of its rivals, for its next-generation Vera Rubin platform. All three of the major memory makers have been jockeying for a slice of that business. 

SK Hynix, which currently leads the HBM market, just announced plans for a stock listing in the US. The company is seeking roughly US$29 billion in the offering, aiming to further capitalise on memory demand. BLOOMBERG