Shares of memory chip giant Micron Technology (MU 4.89%) rallied as much as 5.2% on Wednesday before falling back to a 3.5% gain as of the end of trading.
Micron received a bullish analyst note yesterday, which likely carried into Wednesday after Oracle's (ORCL 3.93%) blowout long-term guidance last night. Yesterday's analyst note indicated memory would continue to be in undersupply next year, while Oracle's news lifted demand expectations for AI-related infrastructure through 2030.
NASDAQ: MU
Key Data Points
Undersupply of memory chips to continue
Yesterday, sell-side analysts at Citigroup issued a positive note on Micron, reiterating its buy rating and saying the memory industry is likely to be in undersupply through 2026. The analysts believe that DRAM's demand growth will outstrip supply growth by 1.8 percentage points. In a surprise note, Citi expects even NAND flash, which has suffered from oversupply in recent years since the pandemic, to see demand outstrip supply by four percentage points.
Even after yesterday's rally, Micron was rising again today on the back of Oracle's blowout backlog figure disclosed last night. Oracle said on its earnings release that its remaining performance obligations (RPO) increased a stunning 359% to $455 billion and that it expects its cloud infrastructure revenue to appreciate from $18 billion this year to $144 billion by 2030.
The analyst note and Oracle's earnings are somewhat connected. In the Citi note, the analyst noted artificial intelligence (AI) inferencing will expand memory demand from high-bandwidth memory (HBM) for training to a variety of DRAM and NAND chips at the edge. The note said, "AI demand shifting from AI training to AI Inferencing and edge AI devices will drive memory demand for general server & mobile DRAM as well as high bandwidth & high-density NAND such as QLC-based eSSD."
Then, on Oracle's call with analysts last night, Chairman Larry Ellison also highlighted inferencing as a huge opportunity:
AI inferencing, that will change everything. Oracle is aggressively pursuing the AI -- and we're not doing badly in the AI training market, by the way. But inferencing is bigger. Oracle is aggressively pursuing the inferencing market as well as the AI training market. We think we are in a pretty good position to be a winner in the inferencing market because Oracle is by far the world's largest custodian of high-value private enterprise data.
Image source: Getty Images.
Micron is in a good spot
Micron has gotten its technology on par or better with memory peers over the last decade, just in time for the AI revolution. Although the memory business has traditionally been capital intensive and highly cyclical, as long as AI is leading to insatiable demand, it should bode well for memory pricing and volumes in the medium term.
