Shares of Micron Technology (MU -0.42%) rose 30.1% in March 2024, according to data from S&P Global Market Intelligence. Chiefly, the maker of computer memory chips reported stellar second-quarter results, inspiring a 14% jump in a single day.
Memory lane is paved with AI chips
Micron's report was a game-changer -- but it wasn't exactly a surprise.
Several analysts posted bullish reports and raised their second-quarter expectations before Micron posted its numbers. Micron's exposure to memory demand in the artificial intelligence (AI) market pointed to strong chip demand.
The financial report affirmed Wall Street's bullish expectations and then some. On average, the freshly raised bottom-line targets still pointed to an adjusted net loss of $0.26 per share on revenues near $5.3 billion -- just above the midpoints of Micron's official guidance ranges. Instead, the company saw positive earnings of $0.42 per diluted share and $5.8 billion in top-line sales.
Management pointed to strong orders from AI-related system builders, shining a spotlight on Micron's tight collaboration with AI-chip designer Nvidia (NVDA 0.03%). The company's high-bandwidth memory (HBM) product series is an official part of Nvidia's latest and greatest AI-accelerating graphics processing units (GPUs):
"Our HBM3E product will be part of Nvidia's H200 Tensor Core GPUs, and we are making progress on additional platform qualifications with multiple customers," CEO Sanjay Mehrotra said on the earnings call. "We are on track to generate several hundred million dollars of revenue from HBM in [the ongoing] fiscal year 2024."
Micron's march beyond the dot-com shadows
Micron's stock continued to rise for several days after this impressive report, helped by a steady stream of optimistic analyst reviews. Share prices finally climbed above the once-unreachable record prices from the dot-com bubble.
However, Micron's business has seen better days. Sales and earnings are on the rise right now, but that's on the tail end of a deep slump in 2022 and 2023:
MU Revenue (TTM) data by YCharts. TTM = trailing 12 months.
Hence, Micron's stock is soaring to record highs, even though sales are down from recent peaks and earnings are negative on a trailing-12-month basis. Bullish Micron investors are placing a lot of trust in the future growth prospects of AI-related sales.
As a longtime Micron shareholder, I'm seriously considering a partial sale right now. The company has a bright future, but I'd rather cash in some of my paper profits to reinvest in lower-priced growth stocks. There's no shortage of those lower-risk ideas, after all.
