How Micron Technology Can Benefit from AI Investments

Artificial intelligence (AI) continues to revolutionize industries around the world, including healthcare, retail, finance, automotive, manufacturing, and logistics, driving demand for cutting-edge technology and infrastructure. Among the companies that will benefit greatly from this AI boom are: Micron Technology (MU)It is a prominent manufacturer of memory and storage solutions.

MU’s stock price has surged more than 70% in the past six months and nearly 104% in the past year. Moreover, the stock price is up about 12% over the past month.

This article examines the broader market dynamics of AI investing and how MU is strategically positioned to capitalize on this trend, providing insight into how investors can act now.

Broad market dynamics of AI investments

According to Grand View Research, the AI ​​market is Exceeding $1.81 trillion by 2030It will grow at a compound annual growth rate (CAGR) of 36.6% from 2024 to 2030. This strong market growth has been driven by the rapid adoption of advanced technologies across numerous industries, increased data generation, developments in machine learning and deep learning, adoption of big data, and significant investments from governments and private companies.

AI has emerged as a key driver of the modern digital era. Tech giants such as Amazon.com (AMZN), Alphabet Inc. (GOOGL), Apple Inc. (AAPL), Metaplatforms (META)and Microsoft Corporation (MSFT) We are investing heavily in research and development (R&D), which is making AI more accessible for enterprise use cases.

Additionally, several companies have adopted AI technologies to improve customer experience and strengthen their position in AI Industry 4.0.

Big Tech has invested billions of dollars in the AI ​​revolution. So far, 2024 has been jointly allocated by Microsoft and Amazon. Over $40 billion invested in AI-related initiatives Data center projects around the world.

DA Davidson analyst Gil Luria expects these companies to spend more than $100 billion on AI infrastructure this year. According to Luria, spending will continue to increase as demand increases. Meanwhile, Wedbush analyst Daniel Ives said he expects leading technology companies to continue investing in AI infrastructure, “spending $1 trillion over the next decade.”

Micron Technology’s Strategic Position

With a market capitalization of $156.54 billion, MU plays an important role in the AI ​​ecosystem as it focuses on providing cutting-edge memory and storage products globally. The company has three divisions: Computing and Networking Division, Mobile Division; Embedded Division and Storage Division.

Micron’s dynamic random access memory (DRAM) and NAND flash memory are critical components for AI applications, providing the speed and efficiency needed for high-performance computing. The company continues to introduce innovative products. HBM2E Equipped with the industry’s fastest and largest capacity high-bandwidth memory (HBM) designed to advance generative AI innovation.

This month, MU announced. Next-generation GDDR7 graphics memory sampling Boasts the industry’s highest bit density. Optimizing workloads with over 1.5TB/s of system bandwidth and four independent channels, Micron GDDR7 memory enables faster response times, smoother gameplay, and faster processing times. Micro GDDR7’s best-in-class features optimize AI, gaming, and high-performance computing workloads.

Notably, Micron recently reached an industry milestone by becoming the first to verify and verify. 128GB DDR5 32GB server DRAM launched Addresses the growing demands for rigorous speed and capacity of memory-intensive Gen AI applications.

Additionally, MU has established strategic partnerships with prominent technology companies such as: NVIDIA Corporation (NVDA) and Intel Corporation (INTC), placing the company at the forefront of AI technology advancements. In February of this year, Micron began mass production of the HBM2E solution to be used in NVIDIA’s latest AI chip. Micron’s 24GB 8H HBM3E It will be part of the NVIDIA H200 Tensor Core GPU.Delivery is expected to begin in the second quarter.

Micron’s 128GB RDIMMs are also available. Deploys on 4th and 5th generation Intel® Xeon® platforms. In addition to Intel, Micron’s 128GB DDR5 RDIMM memory will be supported by a robust ecosystem, including: AMD (Advanced Micro Device), Hewlett Packard Enterprise (HPE)Supermicro, etc.

Furthermore, Last April, MU certified a full suite of automotive-grade memory and storage solutions for Qualcomm Technologies Inc.’s Snapdragon Digital Chassis, a comprehensive set of cloud-connected platforms designed to support data-rich, intelligent automotive services. The partnership aims to help the ecosystem build the next generation of intelligent vehicles powered by sophisticated AI.

Strong second quarter financials and optimistic outlook

Strong AI demand and limited supply led Micron to accelerate its return to profitability in the second quarter of fiscal 2024, which ended February 29, 2024. MU had revenue of $5.82 billion, beating analysts’ estimates of $5.35 billion. This sales compares to $4.74 billion in the previous quarter and $3.69 billion in the same period in 2023.

The company’s non-GAAP gross margin was $1.16 billion, compared to $37 million in the prior quarter and negative $1.16 billion in the year-ago quarter. Micron’s non-GAAP operating income was $204 million, compared with operating losses of $955 million and $2.08 billion in the year-ago quarter and prior quarter, respectively.

MU reported non-GAAP net income and earnings per share of $476 million and $0.42 in the second quarter, compared to non-GAAP net income and earnings per share of $2.08 billion and $1.91, respectively, in the year-ago period. The company’s EPS also topped the consensus loss per share estimate of $0.24. Operating cash flow for the quarter was $1.22 billion, compared to $343 million for the same quarter in 2023.

“Micron delivered fiscal second quarter results with revenue, gross margin and earnings per share well above the upper end of our guidance range, a testament to our team’s outstanding execution on pricing, products and operations.” said Sanjay Mehrotra, President and CEO of MU. “Our outstanding product portfolio lays the foundation for solid performance in the second half of fiscal 2024. We believe Micron is one of the semiconductor industry’s biggest beneficiaries of the multi-year opportunities enabled by AI.”

For the third quarter of 2024, the company expects revenue of $6.6 million ± 200 million, with gross margin of 26.5% ± 1.5%. Micron also expects non-GAAP earnings per share to be $0.45 ± $0.07.

conclusion

MU is strategically positioned to benefit from the rapidly growing AI market through its diverse portfolio of advanced memory and storage solutions, strategic partnerships and investments, strong financial strength characterized by strong revenue growth and profitability, and an expanding market presence.

The company’s recent innovations, including HBM3E and DDR5 RDIMM memory, highlight its commitment to enhancing capabilities across AI and high-performance computing applications.

Moreover, the company’s second quarter 2024 results exceeded analysts’ expectations, driven by the AI ​​boom. Micron also provided rosy guidance for the third quarter of fiscal 2024. Investors are eagerly awaiting insights into MU’s financial performance, strategic updates and outlook during the third quarter. Performance conference call scheduled for June 26, 2024.

Braid Senior Research Analyst Tristan Gerra Upgrades MU stock from ‘neutral’ to ‘outperform’ He then increased his price target from $115 to $150, noting that the company has meaningful upside opportunities. Gerra said that while DRAM chip prices are rising, supply is expected to slow. Also, Morgan Stanley We raised our outlook for Micron. From “underweight” to “same weight.”

As AI investments continue to grow across a variety of sectors, Micron could gain significant market share, making it an attractive option for investors seeking long-term growth in the semiconductor sector.