TL;DR
- Micron's quarterly revenue rose almost fivefold to $54.23 billion, and it expects $61.5 billion next quarter.
- AI processors need ever more high-bandwidth memory, and only three companies can make it in volume.
- Brokers rushed to raise their price targets, but the old worry remains: new factories have always ended memory booms.
For most of the AI boom, the story has been about processors: who makes them, who can get them, and how much Nvidia charges.
Micron Technology's latest results suggest the real squeeze has moved somewhere less glamorous.
The US memory-chip maker posted revenue of $54.23 billion for its fiscal fourth quarter, which ended in late August.
That is almost five times the $11.32 billion it made a year earlier, and comfortably ahead of the $51.07 billion analysts expected.
Net income rose to $37.7 billion from $3.2 billion.
Micron expects about $61.5 billion in revenue this quarter, against market forecasts of $57 billion.
Memory matters
Processors do the thinking, but memory chips hold the data they work on, and AI models need vast amounts of it.
The product in demand is high-bandwidth memory (HBM), which stacks layers of standard dynamic random-access memory (DRAM) so data can move faster.
Every new generation of Nvidia and AMD graphics processors uses more of it.
Only three companies make HBM in volume: SK Hynix, Samsung and Micron.
They cannot keep up, and prices have soared as a result.
Micron's DRAM sales rose 343% year on year to $39.8 billion, nearly three-quarters of its revenue.
Chief executive Sanjay Mehrotra said the company was working with Nvidia on the industry's first custom HBM product.
Markets breathe out
The figures landed after Wall Street closed on Wednesday, so Asia reacted first.
Japan's Nikkei 225 jumped 3.3%, led by chip equipment makers Advantest and Tokyo Electron.
In Seoul, SK Hynix rose 3% and Samsung Electronics 2.5%, as investors read Micron's numbers as good news for its rivals too.
Nasdaq futures pointed to a 1.3% gain at the New York open.
The relief is about more than one company.
Micron's customers are the firms building AI data centres, so a strong order book suggests the big tech spending spree has not yet run out of steam.
Hendi Susanto of Gabelli Funds said he had seen no sign that the memory cycle was about to turn.
Trillion-dollar memory maker
Micron's shares have risen more than 500% over the past year, taking its stock market value above $1.2 trillion.
It is spending $250 billion on two new manufacturing campuses to meet demand.
Work began on the larger site, in Clay, New York, in January, and the first new plant in Boise, Idaho, is due to open next year.
That new capacity is the industry's big question mark.
Memory has long been a boom-and-bust business, and new factories have usually signalled the end of a shortage.
Phison's chief executive, KS Pua, argues this time could be different, with AI demand growing faster than new plants can be built.
The bill lands at home
The shortage is not confined to data centres.
Tight memory supply has already pushed up prices for consumer gadgets, including Apple's iPads and MacBooks.
If Pua is right, shoppers could be paying the AI premium for some time yet.
Wall Street's verdict was close to unanimous: buy
Rosenblatt lifted its price target to $1,900 from $1,500 and kept its Buy rating.
The broker called it a beat-and-raise quarter, driven by strong demand and rising prices from one quarter to the next.
Mizuho raised its target to $1,400 and kept an Outperform rating.
RBC Capital held its Outperform rating and $1,500 target, saying the results and outlook were only slightly ahead of recently raised expectations.
BMO Capital and Raymond James also stayed at Outperform, with targets of $1,300 and $1,500 respectively.
The most bullish was Melius Research, which repeated its Buy rating with a $2,200 target.
Melius pointed to clearer long-term visibility and expects Micron to buy back a lot of its own shares.
Needham reiterated its Buy rating and $1,650 target.
Wedbush's Matt Bryson had called it in advance, predicting a beat and raise with pricing better than the market assumed.
The doubters
Micron's own shares were less excitable than the Asian market. The stock's reaction was muted, as investors weighed strong pricing against heavy spending on new factories and the risk that the cycle turns.
That is the old fear with memory: when the new plants open, prices fall.
Some analysts think Micron can ride out a downturn this time.
Pierre Ferragu of New Street Research argued in August that HBM has changed the company's economics.
He believes Micron would keep generating cash even through a four-year slump, and estimates it could hold more than $600 billion in cash by 2030.
The average analyst target sits at about $1,534, against a share price of around $1,065, although the lowest is just $361.
