By Dan Gallagher
Like most chip companies not named Nvidia, Micron can't live on artificial intelligence alone.
Booming demand for generative AI components is definitely helping the memory chip maker, by lifting its high-bandwidth memory sales. HBM revenue more than doubled quarter-over-quarter, and analysts polled by Visible Alpha think it it will surge tenfold over the full fiscal year.
But at an estimated 8% of Micron revenue, HBM can't fully compensate for weakness elsewhere. That's especially true in the short term.
Micron projected revenue for the current quarter that was 12% below Wall Street's targets, the biggest such miss in years. The stock, already off nearly one-third from this year's record high, slid Thursday.
Most analysts aren't too worried; 86% rate the stock as a buy compared to 68% two years ago. Several had expected a weaker forecast given well-known struggles in markets like PCs and smartphones-still major consumers of memory chips.
Encouragingly, Micron's management also raised estimates for the overall HBM market by 20% from just three months ago-and predict it will be overtake the entire DRAM market by 2030. UBS analyst Tim Arcuri remains convinced Micron's leadership in the high-bandwidth market "will be transformational for margins."
Still, some concerns remain. Vivek Arya of BofA Securities cut Micron to a neutral rating, noting pressure on gross margins.
And PCs continue to be a major end-market, making recovery there important for Micron's overall business. That will hinge in part on demand for AI-enabled devices that so far haven't proven to be major sellers. Micron's AI story remains complicated.
This analysis comes from the Journal's Heard on the Street team. Subscribe to their free daily afternoon newsletter here.
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(END) Dow Jones Newswires
December 19, 2024 11:36 ET (16:36 GMT)
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