The demand for artificial intelligence (AI) chips is on the rise. And for chip stock Micron Technologies (MU), a recent forecast about just how fast that demand is rising left shares spiking. Micron shares were up over 13.5% in Thursday afternoon’s trading.
The good news for Micron here is that it is one of three companies that make high-bandwidth memory (HBM), alongside SK Hynix and Samsung. That means that Micron is the only U.S. company that makes HBM, and that has opened up a clear path to profitability as generative AI takes off like a goose in fall.
Based on Micron’s projections, it is looking at a future windfall. Micron looks for revenue between $8.5 billion and $8.9 billion just in its first quarter, with gross margins increasing 39.5%. That is well ahead of analyst expectations calling for $8.28 billion and adjusted gross margins of 37.7%. The expectations were high, but Micron is poised to blow them away.
Not Just Processors
Micron is also coming out with some new tools that are about more than just processors. Reports note it also has a new solid state drive (SSD) coming out that will feature a 2 times speed boost component, making it a perfect solution for PC gamers. It will also be part of the PlayStation 5, which gives it an unexpected edge in the console gaming lineup.
Capacities will run up to two terabytes, which is objectively impressive for an SSD but not so much when compared to hard drive capacities, which these days can reach 24 terabytes or more.
Is Micron Stock a Buy or Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MU stock based on 24 Buys, one Hold and one Sell assigned in the past three months, as indicated by the graphic below. After a 60.27% rally in its share price over the past year, the average MU price target of $128.04 per share implies 35.95% upside potential.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
