Micron Technology, a leading memory chip maker, experienced a surge in Micron Share after surpassing Wall Street’s expectations in its third-quarter earnings report. The company also provided an optimistic forecast for its fourth-quarter sales, further fueling investor confidence. Micron’s positive performance comes amid the growing hype around artificial intelligence (AI) and its potential impact on the chip industry.
AI craze at Wall Street
According to a video transcript from Yahoo Finance Live, AI has become a craze on Wall Street, with companies like Nvidia leading the charge. Nvidia’s stock has soared by an impressive 181%, contributing significantly to the overall gains of the NASDAQ. Consequently, investors are increasingly pouring money into chip companies of all types. Advanced Micro Devices (AMD), for example, recently unveiled its new AI chip, which includes an accelerator that enhances the processing speed for technologies like ChatGPT.
However, potential headwinds loom over the chip industry’s growth. The United States is reportedly considering imposing new restrictions on AI chip shipments to China. The concern stems from the possible threat posed by advanced AI capabilities falling into the hands of US rivals. As early as next month, the US Commerce Department might block shipments to China from chip manufacturers like Nvidia, as reported by the Wall Street Journal.
Micron Shares Jump after posting better-than-expected Q3 results
How Micron can Benefit from AI?
Amid these developments, Micron stands out as a memory chip maker that caters to various devices, ranging from PCs to smartphones. While not directly positioned in the AI industry like Nvidia, Micron can still benefit from the AI revolution. Angelo Zino, a Research Senior Equity Analyst at CFRA, explains that as more advanced AI-driven servers are developed, the need for increased memory arises. These servers, which power supercomputers and large language models, require greater memory capacity. Consequently, the demand for Dynamic Random-Access Memory (DRAM) and NAND flash memory, which are Micron’s key offerings, is expected to rise.
Zino highlights that Micron Share is primarily DRAM-driven, with over 70% of its revenue derived from DRAM sales. This positioning aligns with the increasing need for memory in advanced AI servers. However, despite the potential for growth, AI servers currently account for only a low single-digit percentage of total server sales. Zino suggests that Micron’s opportunity in the AI theme is still in its early stages, but the company’s focus on memory positions it favorably for future growth as the AI market expands.
While Micron Share’s future growth potential in AI is promising, the company also faces the ongoing recovery of PC demand. Micron’s management has acknowledged the slow recovery in PC demand and anticipates a resurgence in early calendar 2024. Zino believes that the market has recognized this timeline and is factoring it into its assessment of the company’s prospects.
Micron Share’s robust third-quarter earnings, coupled with its positive fourth-quarter sales forecast, have boosted investor confidence, leading to a surge in the company’s shares. While Micron may not be as directly exposed to the AI industry as some other chip manufacturers, its focus on memory makes it well-positioned to benefit from the growing demand for advanced AI-driven servers. As the AI market expands and the recovery in PC demand progresses, Micron Shares could further capitalize on these trends.