Sanjay Mehrotra, the CEO of Micron Technology (MU), holds a different perspective on the key to happiness than the common adage suggests. While some may believe that good health and a bad memory are essential, Mehrotra sees the burgeoning field of artificial intelligence (AI) as a transformative force shaping the future.
During Micron’s first-quarter earnings call in December, Mehrotra emphasized the critical role of computer memory in the realm of AI, highlighting its importance in GPU-enabled AI servers. He noted that Micron is witnessing strong demand for memory due to the early adoption of AI solutions, a trend expected to accelerate in the future.
Mehrotra expressed confidence in Micron’s position to capitalize on this growth, citing the company’s extensive portfolio of new technologies and products introduced in its 45-year history. While Nvidia (NVDA) currently holds a dominant position in high-end AI chip manufacturing, Mehrotra’s remarks underscore Micron’s strategic focus on leveraging the AI-driven transformation across various sectors of business and society.
Environmental concerns
Micron’s strategic move into mass producing high-bandwidth-memory (HBM) chips for Nvidia’s AI GPUs has proven to be a lucrative endeavor. The company anticipates generating significant revenue from these shipments, amounting to “several hundred millions of dollars” in fiscal 2024, with continued growth expected in 2025. The adoption of HBM chips not only enhances performance but also contributes to reducing overall power consumption, a crucial aspect in the development of AI strategies given their intensive computing requirements.
However, concerns have been raised about the environmental impact of AI technology, particularly regarding its significant electricity consumption. Alex de Vries, a researcher at VU Amsterdam, has likened the energy consumption of AI to that of a small country, emphasizing the need for sustainable practices in its development. De Vries advocates for policy measures, such as disclosure requirements, to address this issue and ensure environmental sustainability.
As Micron prepares to report its second-quarter results on March 20, analysts are adjusting their stock price targets in anticipation. Wedbush analyst Matt Bryson raised his price target for Micron to $103 from $95, citing the company’s optimistic commentary on HBM shipments and its potential for significant revenue growth. Management’s reaffirmation of their optimistic outlook during the earnings call is expected to bolster investor confidence in Micron’s future prospects.
Increasing market share
Analysts continue to express bullish sentiments on Micron Technology (MU) based on its strong performance and strategic initiatives. Citi analyst Christopher Danely reiterated his buy rating on Micron and raised his price target to $150 from $95, citing expectations of upside to consensus estimates and increased guidance for the third quarter. Danely highlighted Micron’s success in penetrating enterprise/cloud accounts and anticipated benefits from its recent successes in the NAND market cycles. He emphasized the company’s potential for growth in the AI market, particularly with shipments of higher-priced, higher-margin HBM chips used in Nvidia AI systems.
Similarly, TD Cowen analyst Krish Sankar raised his price target on Micron to $120 from $100 while maintaining an outperform rating. Sankar expects Micron to significantly increase its market share in the HBM segment, potentially capturing over 25% of the market share next year. He sees the anticipated qualification with B100 as a catalyst that could enhance Micron’s valuation, with a potential target of $150 per share if these market share gains are sustained. Sankar also highlighted the potential for Micron’s valuation to benefit from maintaining momentum in HBM market share, driven by a high compound annual growth rate of related earnings.
Overall, analysts are optimistic about Micron’s prospects, particularly in the AI and HBM markets, and anticipate continued growth and market share expansion for the company in the near future.