Medha Singh and Aditya Soni
(Reuters) – Shares of memory chip maker Micron Technology (NASDAQ:) rose to a record on Thursday after a strong revenue forecast fueled optimism that rising demand for artificial intelligence hardware will lift vendor Nvidia (NASDAQ:) to new heights. tops.
Shares were last up 15%, lifting the broader Philadelphia chip index 3% higher. Micron, which reports earnings ahead of rivals, helps gauge broader demand for semiconductors.
The company said Wednesday that its high-bandwidth memory (HBM) chips, which are ultra-fast semiconductors used in developing artificial intelligence applications, were sold out for 2024. Most of its supplies for 2025 have also been allocated, the company added.
“Memory is a key beneficiary of AI adoption, and we expect a V-shaped recovery for the industry, with revenues expected to grow 55% in 2024 and 35% in 2025,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. .
Micron, one of Nvidia’s two HBM chip suppliers along with South Korea’s SK Hynix, was expected to increase its market value by nearly $16 billion based on its share price of $110.92.
On Wednesday, ahead of the results, Micron shares were trading at about 24 times 12-month earnings estimates, compared with 14.53 for its smaller rival. Western Digital (NASDAQ:).
Micron shares are up more than 60% over the past 12 months, boosted by investor confidence that the company will increase its share of the high-margin HBM market this year and next.
Micron Chief Commercial Officer Sumit Sadana told Reuters on Wednesday that the company had secured new customers for its HBM products that it had not yet announced.
Current-quarter adjusted gross margin forecast of 26.5% (plus or minus 1.5%) was also above market estimates of 20.8% as relatively new HBM chips are in short supply, giving companies like Micron more pricing power.
“Limited supply, rising demand, normalization of excess inventory, coupled with increasing HBM size, are driving sharp improvement in prices,” Piper Sandler analysts said.