Micron Technology Inc. surprised investors by returning to profitability sooner than expected, largely driven by significant orders for its high-bandwidth memory (HBM) chips for artificial intelligence (AI) applications. Despite facing looming competition in the HBM market from major rivals, Micron’s strong performance led to a notable surge in its shares during after-hours trading.
While analysts expressed satisfaction with Micron’s progress, questions lingered about the gross margins for its latest HBM chips, especially with the impending entry of competitors like Samsung Electronics. Micron’s CEO, Sanjay Mehrotra, emphasized the company’s focus on increasing production capabilities rather than projecting pricing for HBM chips.
Micron disclosed that its latest HBM3E chips are already sold out for the current calendar year, with most of its 2025 supply already allocated. The company anticipates generating significant revenue from HBM in fiscal 2024, reflecting the high demand for this technology in AI data centers and servers due to its superior speed and efficiency.
Although Micron currently leads in the HBM market, analysts are curious about the potential impact of Samsung and SK Hynix entering the market, expected in the first half of the year. However, the effect of competition on HBM pricing may not be felt until 2025 or later, as chips in high demand typically command premium prices, especially when other vendors face supply shortages.
Mehrotra highlighted the increasing demand for various types of memory, including DDR5 and data-center SSDs, driven by AI applications. This demand has contributed to positive pricing trends across memory and storage markets.
While Micron’s performance in the AI market has made it a sought-after investment, investors should remain vigilant for any signs of a potential price war with its competitors. Although a price war seems unlikely in the near term, it could signal an inventory glut in the future, which currently appears distant.