The NVIDIA equivalent in memory chips

Micron technology NASDAQ:MU is perfectly positioned to follow in the AI ​​leader’s footsteps NVIDIA NASDAQ:NVDA. Where NVIDIA controls most of the data center market share and, by extension, the AI ​​accelerator market, Micron controls much of the memory chip market, which also helps AI. The point is that NVIDIA is leading the first wave of the AI ​​revolution, and Micron is now uniquely positioned to lead the second.

That wave is the embedding and application of artificial intelligence in the IoT, from our PCs to mobile and connected devices. This is a much bigger wave and will sustain growth for a longer period.

Micron’s stock price rose 20% on similar results to NVIDIA

Analysts were expecting solid results from Micron as market and inventory conditions normalized, but the FQ2 report exceeded all expectations. The rise of AI has compounded end-market normalization, driving double-digit growth across all product categories and business segments.

Across product categories, DRAM chip sales increased 53% and were led by a 77% increase in NAND. As for business segments, all segments grew at least 28%, led by a 78% increase in storage, a 70% increase in mobile and a 59% increase in computing. The weakest segment is Embedded with 28%, but an acceleration is expected in the coming quarters.

The market-moving details are the 58% increase in revenue, the 875 basis points of outperformance, and the surprise profits. Micron has faced an inventory glut and reset inventory, posting significant losses over the past year and was not expected to return to profitability until the fiscal second half.

As it stands, revenue strength and internal efficiencies have led to operating cash flow growing 4x year-over-year and reversing losses. Adjusted earnings of $0.42 were not only up from last year’s loss, but also beat consensus forecasts reported by Marketbeat.com by $0.66.

Micron is building business momentum in 2024

Mircon’s results are quite impressive, but guidance will keep the stock higher. The second quarter results led management to raise guidance for the year, raising expectations for the third quarter: the new forecast calls for revenue growth at 76% or 1000 basis points above consensus with strong margins. Adjusted earnings are forecast at $0.45, more than double the consensus forecast. Assuming the company continues to gain momentum, it is expected to raise guidance again at the end of the third quarter.

The latest PC demand estimates are just one driver of the business. PC shipments are expected to increase in 2024, with gains centered on the artificial intelligence market. AI-enabled PC shipments are expected to account for nearly 18% of the market in 2024 and then more than double to 40% in 2025 as the upgrade cycle gathers momentum.

Analysts guide Micron to a new all-time high

Analysts are impressed with Micron’s results and guidance and are therefore upgrading sentiment and price targets. Marketbeat tracks more than a dozen post-release reviews; all include a sentiment update, price target revision, or both. Argus and Fox Advisors upgraded the stock to Buy from Neutral Equivalents; the consensus price target rose about 20% in two days, leading the market.

The consensus estimate places Micron around $110, in line with post-release action, but most new targets are between $120 and $160, with one notable exception. Rosenblatt Securities sets new target high; is $225 and more than double the current market price.

Micron shares can double from new high

The surge in Micron stock is significant because it sets a new all-time high above the 2000 DotCom market bubble. The move is a pivot above a trading range that could send it advancing $95 or more to exceed $200. The minimum target is near $150, derived by projecting the width of the 2020-2024 trading range above the critical resistance point.

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