Micron Technologies (NASDAQ: MU) reported bonkers earnings last week, showing investors can still reap gains from the booming AI trend — if they’re opportunistic.
Here’s the interesting thing about Micron stock…
It shot up nearly 20% in a single day last week after reporting blowout earnings and a rosy forecast. But that’s after it shed an astonishing 44% from mid-June to early August, in part because its last earnings report fell short of Wall Street’s lofty expectations.
This is part of the AI investing package now. Investors are constantly being caught in Wall Street riptides where rabid speculation drives AI stocks to absurd highs and then drags them back down when they fail to meet improbable expectations.
The answer to this is discipline. AI investors must sell, or at least pass on the dizzying highs, and seize on the pullbacks as buying opportunities.
Micron, which makes dynamic random access memory (DRAM) chips for companies like Nvidia and Intel, is a great example of that.
The stock traded as high as $157 per share back in June, but fell as low as $86 in both August and September. Now it’s back up, trading around $111.
Again, this is because expectations have seesawed even as the company’s outlook has remained relatively consistent. Still, even for Micron, last week’s earnings report was extremely promising.
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Micron Earnings
Micron reported a 93% increase in revenue totaling $7.75 billion in its fiscal fourth quarter. That handily topped analysts’ expectations of $7.66 billion.
Adjusted earnings per share came in at $1.18 also exceeding Wall Street projections of $1.11, as well as the high end of Micron’s own guidance.
Just how good is that?
So good that CEO Sanjay Mehrotra couldn’t help but gush on his company’s earnings call.
“With the advent of AI, we are in the most exciting period that I have seen for memory and storage in my career,” Mehrotra said. “We are entering fiscal 2025 with the best competitive positioning in Micron’s history.”
Indeed, Micron forecast record revenue and improved profitability for the current quarter (its fiscal first), as well. The company anticipates revenue around $8.7 billion, compared with an average analyst estimate of $8.3 billion. And it projects profit in the neighborhood of $1.74 a share, versus a projection of $1.52.
AI is the reason why.
Tech companies are pouring billions into massive AI data centers. And with Nvidia and AMD gearing up to unleash a new generation of CPUs, data centers (old and new) will soon be updating their chips to more advanced models.
“We expect traditional server demand to benefit from a refresh cycle, as a single latest-generation traditional server can replace multiple older-generation servers to provide valuable space, power and performance improvements to improve data center efficiency,” Mehrotra says.
Micron believes the market for high-bandwidth memory chips used in AI data centers will increase five-fold, to $25 billion, in 2025 from $5 billion this year.
And that’s not all.
Micron is also benefiting from a resurgence in the PC and smartphone market, where manufacturers are upgrading devices to accommodate AI software processing demands. These devices will increasingly feature AI functionality that requires more memory chips to work properly.
AI-enabled smartphones are now shipping with 12GB–16GB of DRAM, compared to an average of 8 GB in flagship phones last year. And AI-enabled PCs require a minimum 16 GB of DRAM for the value segment, and as much as 64 GB for the mid and premium segments, compared to 12 GB for the average PC last year.
As if things couldn’t get any better, Micron has been able to leverage this demand to increase its prices. And it’s been one of the biggest beneficiaries of the CHIPS Act, which has also loosened environmental requirements for domestic microchip projects.
So everything is looking up for Micron stock, which looks like a decent value even with last week’s surge.
Fight on,
Jason Simpkins
Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more…
In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor’s page.
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