By Zaheer Kachwala and Anhata Rooprai
June 24 (Reuters) – Micron forecast quarterly revenue and income properly above expectations on Wednesday and stated its prospects had dedicated $22 billion to lock in provides of reminiscence chips, sending its shares surging 12% in after-hours buying and selling.
The forecast – and third-quarter outcomes that beat Wall Road estimates – underscore how AI-driven shortages are forcing Micron’s large-scale knowledge middle prospects to fund capability, reshaping the reminiscence market.
Micron, a key provider for Nvidia’s AI processors, has benefited from the scarcity.
The corporate, the one U.S.-based producer of excessive bandwidth reminiscence chips used alongside Nvidia’s AI processors, has seen demand for these chips far outstrip its manufacturing capability, permitting the corporate and rivals SK Hynix and Samsung Electronics to cost a premium for his or her merchandise.
Hynix can also be exploring a U.S. itemizing, underscoring investor efforts to faucet into the AI-driven reminiscence surge.
“We anticipate tight situations to persist past calendar 2027 because of AI-driven demand throughout all segments coupled with structural provide constraints,” Micron CEO Sanjay Mehrotra stated in ready remarks. He added that the corporate doesn’t have a way of when reminiscence provide will meet up with growing demand.
The chipmaker additionally outlined a enterprise mannequin shift aimed at making demand much less cyclical. The $22 billion in commitments will come from 16 strategic buyer agreements Micron has signed, spanning knowledge middle, shopper and automotive markets, with take-or-pay commitments, money deposits and pricing flooring designed to lock in provide and shield margins.
Micron additionally stated that remaining efficiency obligations – a key indicator of future contracted income – for the client agreements it has entered into to date are round $100 billion.
“The scale and scale of the AI construct out has been underestimated at each flip and reminiscence will proceed to command premium pricing on provide constraints,” stated Daniel Newman, CEO of tech analysis agency Futurum Group.
CAN PRICING POWER HOLD?
Micron’s inventory has surged greater than threefold this 12 months, regardless of a 13% plunge on Tuesday as a part of a broader selloff, boosting its market worth to over $1 trillion.
The rebound comes after a brutal industry-wide stoop in 2023, when extra stock crushed costs, however some analysts have questioned whether or not pricing energy can prolong past AI-driven merchandise into the broader market.
Micron’s inventory surge on Wednesday after outcomes, together with a leap in Qualcomm shares, boosted late-day features in Western Digital, Sandisk , Seagate Know-how, Arm Holdings, Marvell, Broadcom, Utilized Supplies, ASML and different chipmakers, producing over $400 billion in inventory market worth.
