Micron soars 16% after blockbuster earnings, lifting some chip stocks

Micron inventory soared on Thursday after the reminiscence maker reported blockbuster third-quarter earnings as the factitious intelligence growth causes demand for reminiscence to surge.

Shares climbed as excessive as 19%, pushing Micron’s market cap above Meta and Tesla among the many most dear U.S. firms. The inventory later pared these features.

The corporate’s income greater than quadrupled from $9.3 billion a yr earlier to $41.46 billion in its fiscal third quarter, it reported on Wednesday. Income got here in larger than analyst expectations of almost $36 billion, based on LSEG consensus estimates.

The corporate is now forecasting income of about $50 billion for the present quarter, a rise from $11.3 billion within the prior yr.

Micron has benefited from the AI infrastructure buildout by main hyperscalers, as AI knowledge facilities require massive quantities of reminiscence chips. That has diminished the availability of reminiscence accessible for smartphones, PCs, and different units, making a provide imbalance that has pushed reminiscence costs larger and boosted Micron’s outcomes.

The corporate mentioned on Wednesday that it has signed 16 long-term agreements with a number of prospects starting from knowledge facilities to automakers, locking in gross sales for a interval of three to 5 years, and it expects to see monetary commitments of $22 billion from them.

The corporate expects about 40% of its income to come back from long-term contracts with a minimal worth inbuilt, RBC Capital Markets analysts mentioned in a be aware on Wednesday. That ought to assist restrict margin threat even when demand weakens in the course of the contract time period, which is usually 5 years, they added.

“Our base case is for present upcycle to proceed by 2027, and SCAs give us added conviction relating to sustainability. We increase estimates, increase PT, and reiterate Outperform,” the analysts mentioned.

Micron’s blowout earnings helped enhance chip stocks, reversing a pointy selloff within the sector that hit firms together with Intel, Nvidia, and Superior Micro Gadgets earlier within the week.

Qualcomm, Intel and AMD climed in early buying and selling Thursday earlier than sinking.

“U.S. equities have recovered some floor as Micron’s earnings have offered recent reassurance that the AI funding cycle stays firmly intact,” Capital.com Senior Market Analyst Daniela Hathorn mentioned in a be aware Thursday.

Hathorn mentioned sturdy demand for reminiscence from knowledge facilities and AI infrastructure prospects reinforces the narrative that capital spending on AI is repeatedly accelerating.

“That has helped carry sentiment throughout the semiconductor sector after current weak point in high-growth names, suggesting traders stay keen to look by short-term volatility so long as the earnings outlook continues to justify elevated valuations,” Hathorn mentioned.