Micron rises 13% as strong forecast impresses hungry investors
Recasts paragraph 1, updates market cap addition in paragraph 2, shares in paragraphs 7,8, adds analyst comments in paragraphs 5, 13, 14
By Arsheeya Bajwa
Sept 26 (Reuters) -Micron Technology MU.O surged more than 13% on Thursday, after its first-quarter revenueforecast indicated strong demandand pricing for the high-bandwidth memory chips(HBM) used to support booming generative artificial intelligence technology.
The company, an Nvidia supplier NVDA.O, was on track to add more than $14 billionto its market capitalization.
Micron delivered its best quarterly revenue growth in a decade in the fourth quarter ended Aug. 29 and its forecast for the current period came in widely above Wall Street estimates.
"If Micron, one of the higher-costmemory providers, is bullish on the market, it bodes well for all of AI and tech," said Ryan Detrick, chief market strategist at Carson Group.
The forecast drove upshares of other chip firms earlier in the day, but theypared gains after a media report said the U.S. Department of Justice was probing server maker SuperMicro Computer SMCI.O.
Super Micro, abig customer of chipmakers, resellsand employs their products in its servers. Shares of Nvidia, Intel INTC.O and Broadcom AVGO.O gave up earlier gains of more than 2% to trade only slightly higher.
Qualcomm QCOM.O and AMD AMD.O were up about 2%. The Philadelphia Semiconductor Index .SOX trimmed its gains to trade 2% higher, afterrising more than 4% earlier in the day.
The bar for Micron was relatively lower this earnings cycle, analysts said. Concerns HBM pricing was weakening due to rising supply had weighed on the stock ahead of the report, with Micron's shares losing more than20% over the last three months.
With those fears allayed, strong HBM pricing is nowexpected to help Micron's gross margins after an expensive ramp-up of its manufacturing capacity for the chips.
The company's expectations for first-quarteradjusted gross margin were aboveestimates. It also saw a big improvement in adjusted gross margin in the fourth quarter to 36.5%.
"It's clear that the AI gravy train hasn't run out of steam as customers including Nvidia have been queuing up for Micron's HBM chips," said Dan Coatsworth, investment analyst at AJ Bell.
"Big demand equals big prices, helping Micron smash margin expectations."
Chip stocks and the Philadelphia Semiconductor Index outperform the S&P 500 https://reut.rs/3XZTSMg
AI frenzy boosts Micron's revenue growth https://reut.rs/3TENzLG
Reporting by Arsheeya Bajwa in Bengaluru; Editing by Janane Venkatraman and Devika Syamnath
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