By Harshita Mary Varghese
(Reuters) – Shares of Micron Technology rose about 14% in after-hours trading after the memory maker forecast higher-than-expected first-quarter revenue due to appetite for its memory chips used in artificial intelligence.
Micron is one of only three suppliers of high-bandwidth memory (HBM) chips, along with South Korea’s SK Hynix and Samsung, allowing the US company to capitalize on demand for semiconductors that help power generative AI technology.
HBM is a space-saving, low-power type of dynamic Random Access Memory Chip, or DRAM, that is crucial for AI-focused graphics processing units, which help process large amounts of data.
“Demand from data center customers remains strong and customer inventory levels are healthy,” Micron CEO Sanjay Mehrotra said on a conference call with analysts.
The company said in June that its HBM chips, used in the AI processors designed by Wall Street darling Nvidia, were sold out for the calendar years 2024 and 2025, with prices already set.
Micron expects to report record first-quarter revenue of about $8.7 billion, plus or minus $200 million, and forecasts an increase in gross margin to about 39.5% for the same period.
Analysts had expected first-quarter revenue of $8.28 billion and an adjusted gross margin of 37.7%, according to LSEG data.
The rise of AI has also helped Micron cushion the blow from a glut of memory chips in the PC and smartphone markets.
Personal computers infused with AI technologies are expected to have more memory chips, which will help companies like Micron.
AI PCs may have more than 30% more DRAM and Microsoft’s push to move users from an older version to Windows 11 could expand the market by 2025, especially for commercial PCs, says Kinngai Chan, senior research analyst at Summit Insights .
Micron’s results generally set the tone for the chip sector, as it has a competitive edge and serves a broad customer base that includes the PC, data center and smartphone industries.
“HBM, high-capacity memory and flash storage in data centers, each of these three product categories will generate multiple billions of dollars in revenue by 2025,” said Micron’s Chief Business Officer Sumit Sadana.
For the first quarter, the company expects adjusted earnings of $1.74 per share, plus or minus 8 cents, compared with analyst estimates of $1.65.
(Reporting by Harshita Mary Varghese and Akash Sriram in Bengaluru and Max A. Cherney in San Francisco; Editing by Shounak Dasgupta and Jacqueline Wong)