Micron Technology (MU 4.81%) has turned out to be one of the biggest beneficiaries of the artificial intelligence (AI) revolution. The memory specialist's revenue and earnings have taken off impressively in recent quarters, and that's not surprising, as its chips are going into multiple AI-powered applications.
Micron's robust growth has led to a nice jump of 78% in its stock price so far this year. The company is set to release its fiscal 2025 fourth-quarter results (for the three months ended Aug. 28) on Sept. 23. The upcoming quarterly report could give this semiconductor stock a nice shot in the arm and set it up for a solid end to the year.
Let's look at the reasons why Micron stock has the potential to soar higher later this month.
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Micron Technology is about to deliver terrific growth once again
Micron updated its guidance for fiscal Q4 last month. It increased its revenue guidance by $500 million to $11.2 billion. The non-GAAP (adjusted) earnings guidance was increased to $2.85 per share at the midpoint as compared to the earlier estimate of $2.50 per share. The new guidance would translate into a 45% year-over-year increase in revenue, while earnings will more than double from the year-ago period's reading of $1.18 per share.
NASDAQ: MU
Key Data Points
Micron's outstanding growth is being driven by the AI-fueled improvement in the demand for its memory chips, which are deployed in data centers, smartphones, personal computers (PCs), and the automotive and industrial end markets. The data center segment in particular is turning out to be a key growth driver for the company as it is witnessing an improvement in demand for its high-bandwidth memory (HBM) chips.
AI chip leader Nvidia is already using Micron's HBM in its Blackwell chip platform. Even better, management announced on the company's June earnings conference call that its HBM has been designed into Advanced Micro Devices's (AMD 1.94%) upcoming MI355X graphics processing units (GPUs) as well. AMD launched its latest AI processors in June this year.
AMD points out that its MI350 AI processor platform has been selected for deployment by multiple cloud giants, including Oracle, OpenAI, and Microsoft, among others. Oracle, for instance, plans to deploy 130,000 of AMD's MI355X GPUs in a data center cluster for both AI training and inference. The good part is that AMD's MI350 GPUs are equipped with 288 gigabytes (GB) of HBM as compared to 256 GB on the MI325X GPU.
Also, the 4 times generational improvement in computing power and a jump of up to 35 times in inference performance that AMD is claiming are likely to spur greater adoption of these chips. Micron, therefore, is in a solid position to make the most of the growth in AI data center GPUs as it is supplying its chips to both the major players in this space.
Additionally, the amount of HBM that Nvidia and AMD are going to pack into their future AI GPUs is expected to jump. Its MI400 GPUs, which are going to be launched next year, are going to pack 432 GB of next-generation HBM4 chips. Even Nvidia is going to make the shift to HBM4 next year when it launches its next-generation Rubin and Rubin Ultra processors.
Micron is already sampling its HBM4 chips to customers, claiming a 60% improvement in compute performance and a 20% reduction in power consumption from the previous generation. As such, there is a good chance that the company will be able to carry forward its impressive growth momentum into 2026.
There are two more catalysts in store for Micron as it moves into the next fiscal year. The first is the 1.2% growth projected in the smartphone market as compared to a 1% increase estimated for 2025, as per IDC. Generative AI-capable smartphones, in particular, are expected to account for a 30% share of the global smartphone market this year, with their share expected to jump to 70% in 2029.
The secular growth of the generative AI smartphone market is great news for Micron since they are being equipped with 50% more compute memory as compared to average smartphones. The second catalyst is the AI PC market, which is expected to witness an 84% jump in shipments next year to 143 million units. As AI PCs also require significantly more dynamic random access memory (DRAM) to run AI workloads, this market gives Micron another avenue to significantly increase its shipment volumes.
The valuation and the eye-popping earnings growth make this stock a no-brainer buy
Micron appears primed to deliver solid results and guidance later this month, and that could give the stock a nice shot in the arm. That's why it may be a good idea to buy Micron stock before Sept. 23.
After all, the stock is trading at just 25 times trailing earnings, a discount to the tech-laden Nasdaq-100's earnings multiple of 31. The forward earnings multiple stands at less than 11, which isn't surprising, considering its stunning bottom-line growth. Analysts are expecting Micron's earnings to jump by 58% in the next fiscal year, which makes buying this AI stock a good idea as its outstanding earnings growth could be rewarded with a richer valuation, leading to more stock price upside.
