Micron Technology projects strong recovery, shares surge

Micron Technology, a leading memory chipmaker, has delivered an optimistic outlook, projecting quarterly revenue above market expectations. The announcement led to a nearly 5 per cent surge in Micron's shares during extended trading on Wednesday, signalling positive signs of a recovery in memory chip demand in 2024 following a notable downturn.

The company anticipates a favourable trend in demand for flash storage and dynamic random access memory (DRAM) in the coming year. Simultaneously, the supply is expected to approach historically normal levels, according to Micron's forecasts. After a challenging year with slumping memory prices, Micron's CEO, Sanjay Mehrotra, expressed confidence in a turnaround, predicting an improvement in memory prices in 2024 and further increases in 2025.

For the second quarter, Micron forecasts revenue of $5.3 billion, plus or minus $200 million, surpassing market estimates of $5.03 billion, as per LSEG data. The company also foresees a normalisation of chip supply for PCs, mobile devices, and other applications in the first half of 2024.

Micron, as a key chipmaker, holds significance as its results provide insights two months ahead of companies reporting in January. Additionally, its memory products often serve as indicators for broader demand trends in the semiconductor market.

The incorporation of generative artificial intelligence into various products has driven demand for Micron's high-bandwidth memory chips. These chips are crucial for training large language models, forming the backbone of AI technology. Micron noted strong demand for AI servers, particularly as data centre infrastructure operators allocate budgets towards content-rich AI servers.

On an adjusted basis, Micron anticipates a loss of 28 cents per share, plus or minus 7 cents, for the second quarter, a more positive outlook compared to market estimates of a loss of 62 cents per share.

The company's positive results align with a broader trend of recovery in the memory market, with competitor SK Hynix supplying AI giant Nvidia. Micron is on the verge of qualification for its HBM3E chips, expected to be used in Nvidia's next-generation Grace Hopper GH200 and H200 platforms.

Micron's expectations include "several hundred million" dollars worth of high-bandwidth memory revenue in fiscal 2024, with continued growth in 2025. High-bandwidth memory (HBM) stands out as one of Micron's most profitable products due to its technical complexity.

The recent positive earnings from major chipmakers Intel and Advanced Micro Devices further underscore the accelerating pace of recovery in PC demand following the post-pandemic supply glut. Micron's encouraging outlook adds to the broader narrative of a rebound in the semiconductor industry.

(With Reuters inputs)