Micron rose 15% in premarket trading on Thursday, leading a rally in chip stocks .
Its strong revenue forecast suggests strong demand for semiconductors that power AI. The company, known for its high-bandwidth memory (HBM) chips used by Nvidia, is expected to add more than $17.5 billion to its market value as it invests in the popular AI processors.
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Increased demand for HBM chips has helped Micron offset inventory buildup in other areas, such as the personal computer market. The company posted its best quarterly revenue growth in a decade in the fourth quarter ended Aug. 29, with its guidance for the current period significantly above Wall Street estimates.
The earnings boost also boosted shares of Nvidia and Broadcom (AVGO.O), which rose more than 1.5%. Other chipmakers, including AMD (AMD.O) and Intel (INTC.O), also rose close to 2.5%.
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“Micron is benefiting from a broad and robust growth cycle in memory chip demand, bolstered by demand related to artificial intelligence,” Morningstar analysts said in a note. The dynamic pricing of HBM chips is expected to improve gross margins , which had been previously impacted by the high growth in its HBM capacity. The company said it expects adjusted gross margin of about 39.5% for the first quarter ended November, compared with estimates of 37.7%.
The company posted a 36.5% increase in the fourth quarter, up from a negative 9.1% in the same period last year. Strong gross margins from HBM products helped drive overall margins, CEO Sanjay Mehrotra said in a conference call after the earnings announcement on Wednesday.
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The bar for Micron has been relatively low this earnings, which helped it beat expectations, according to Morgan Stanley analysts. After Micron's last earnings report in June, nine of 26 analysts had cut their first-quarter revenue estimates, according to LSEG, due to concerns about HBM's pricing weakness.
Source: Reuters
