Micron Technology (MU.O), was at a record high on Thursday as its solid sales projection fueled hope that AI hardware demand would drive the Nvidia supplier to new heights.
The stock rose 15%, raising the Philadelphia chip index (.SOX), and opens new tab 3% higher. Micron's results, released before peers, help gauge semiconductor demand.
High-bandwidth memory (HBM) chips, ultrafast semiconductors required in AI development, were sold out for 2024, the business stated Wednesday. Additionally, most of its 2025 supply has been allocated.
"Memory is a key beneficiary of AI adoption and we expect a V-shaped recovery in the industry, with revenues growing 55% in 2024 and 35% in 2025," said UBS Global Wealth Management chief investment officer Mark Haefele.
Given its share price of $110.92, Micron, one of Nvidia's two HBM chip suppliers, and South Korea's SK Hynix (000660.KS), opens new tab, were set to add roughly $16 billion to their market worth.
Micron traded at 24 times its 12-month forward profit projections on Wednesday before results, while Western Digital traded at 14.53. Micron's shares have risen more than 60% in the past year on investor optimism that the company will grow its high-margin HBM market share this year and next.
On Wednesday, Micron's CBO, Sumit Sadana, told Reuters that the company has signed up additional HBM clients without announcing them. As new HBM chips are in short supply, Micron can charge more with its current-quarter adjusted gross margin prediction of 26.5%, plus or minus 1.5%, over market estimates of 20.8%.
"Tight supply, increasing demand, normalization of excess inventory coupled with the increased size of HBM is driving dramatic improvements in pricing," Piper Sandler stated.
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