Micron bounces back as AI drives up memory prices

'Our HBM is sold out for calendar 2024,' trills CEO

Micron is basking in a market bounceback, crediting the surge of interest in AI for a jump in the company's revenue, even though buyers face the prospect of rising memory prices for the year ahead.

The Boise, Idaho memory maker reported revenue of $5.82 billion for its fiscal Q2 2024 ended February 29, up more than 50 percent year-on-year.

Revenue, gross margin, and earnings per share were "well above the high end" of Micron's own guidance ranges, pointing to "much improved market conditions" that have helped return the biz to profitability a quarter earlier than industry watchers were expecting.

According to MarketWatch, Micron shares were surging in late trading in the US on Wednesday, gaining 18 percent on the day.

Those improved market conditions equated to increased demand for Micron's DRAM and NAND memory products, driven by the AI craze that has been tilting the market towards higher performance systems with beefed-up configurations.

"This improvement in market conditions was due to a confluence of factors, including strong AI server demand, a healthier demand environment in most end markets, and supply reductions across the industry," president and CEO Sanjay Mehrotra said on the company's earnings call.

"AI server demand is driving rapid growth in HBM, DDR5, and datacenter SSDs, which is tightening leading-edge supply availability for DRAM and NAND," he added.

This is resulting in a "positive ripple effect" on pricing across all memory and storage end markets, Mehrotra said, and so Micron is forecasting DRAM and NAND pricing to increase throughout calendar year 2024, leading to greater revenue and profitability in the company's fiscal year 2025.

Forecast mixed

This is, however, a double-edged sword, as rising memory prices mean greater profits for the likes of Micron, but will hit buyers that have already been feeling the pinch from the hiked interest rates over recent years.

"We are in the very early innings of a multiyear growth phase driven by AI as this disruptive technology will transform every aspect of business and society," Mehrotra opined.

"Memory and storage technologies are key enablers of AI in both training and inference workloads, and Micron is well-positioned to capitalize on these trends in both the datacenter and the edge. We view Micron as one of the biggest beneficiaries in the semiconductor industry of this multiyear growth opportunity driven by AI," he said.

As an example, Mehotra pointed to Nvidia's announcement this week of new products based on the Blackwell GPU architecture that feature a 33 percent increase in HBM3E memory content, which Micron has now begun high volume shipments of.

"Our HBM is sold out for calendar 2024, and the overwhelming majority of our 2025 supply has already been allocated," Mehotra added.

Micron's Q2 revenue was largely from DRAM, which at $4.2 billion accounted for 71 percent of turnover, with bit shipments increasing by "a low single-digit percentage" and prices increasing by high teens, according to CFO Mark Murphy.

At $1.6 billion, NAND made up 27 percent of revenue, with bit shipments actually decreasing by a low single-digit percentage but prices jumping by more than 30 percent.

Looking ahead to fiscal Q3, bit shipments are expected to be down modestly for DRAM and up somewhat for NAND, Murphy said. "While demand continues to improve, supply is constrained, especially at the leading edge."

Micron is forecasting another jump in revenue for its Q3 to $6.6 billion, give or take $200 million, while the company's CapEx plans remain unchanged at a range between $7.5 billion and $8 billion, according to Mehotra. Micron has assumed CHIPS Act grants in its CapEx plans for fiscal 2024, the CEO confirmed.

"Our planned Idaho and New York projects require Micron to receive the combination of sufficient CHIPS grants, investment tax credits, and local incentives to address the cost difference compared to overseas expansion," he said.

The US Department of Commerce this week granted Intel $8.5 billion in direct funding and up to $11 billion in loans for its expansion plans, but no word so far on what Micron can expect. ®

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