Micron Technology shares moved higher in early Monday trading after a top Wall Street analyst issued a bullish note on the memory chip market ahead of its quarterly earnings report later in the week.
Micron (MU) has underperformed the Nasdaq this year, rising around 24% compared the benchmark’s 32.7% gain, as pricing in the market for the tech group’s DRAM memory chips, a key component in consumer tech products that comprises around a third of its overall revenues, remains muted.
Investors are betting, however, on Micron’s newly-established position in the market for so-called HBM, or high bandwidth memory, chips, which improve performance and reduce power consumption in AI systems.
Those chips, including a new HBM3E iteration, are now being built into Nvidia’s (NVDA) H200 processors, as well as its newly developed Blackwell systems, have established Micron as one of just a few global companies that can compete in this fast-growing market.
That place was confirmed earlier this month by $6.1 billion in support from the U.S. government’s CHIPS and Science Act aimed at supporting Micron’s plans to invest around $125 billion in new production facilities in New York and Idaho.
“Leading-edge memory chips are foundational to all advanced technologies, and America is rebuilding its capacity to produce these critical capabilities for the first time in almost two decades,” said U.S. Secretary of Commerce Gina Raimondo.
DRAM pricing weakness, tied in part to fading consumer demand, will likely hover over the group’s fiscal first quarter earnings, expected after the close of trading Wednesday.
Micron CEO Sanjay Mehrotra has said the market for HBM chips will rise to around $25 billion this year.
Micron is expected to post profits of around $1.72 per share, with revenues rising around 85% from last year to $8.72 billion.
Solid HBM, soft DRAM
Micron itself forecast revenue in the region of $8.7 billion, with a $200 million margin of error, as well as earnings of around $1.74 a share.
Profit margins, Micron said, would improve by 3 percentage points to 39.5% thanks in part to a heavier mix of higher-priced HBM sales.
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The group said it saw the total addressable market for HBM chips, which are also made by South Korea’s SK Hynix and Samsung Electronics, rising to around $25 billion in 2025 from $4 billion in 2023.
Citigroup analyst Christopher Danely, who reiterated his ‘buy’ rating and $150 price target in a note published Monday, expects the group to post “results and guidance slightly below Consensus driven by legacy DRAM weakness”
Memory is key tech driver
“While there is excess DRAM inventory in the PC and handset end markets (combined 50% of F24 sales), this should go away this spring and is being offset by strength from the data center end market (35% of F24 sales),” Danely and his team wrote.
The analyst, however, said he remains “bullish on the DRAM recovery given supply/demand dynamics for the coming calendar year.”
Elazar Advisors analyst Chaim Siegel, meanwhile, sees Micron’s earnings as playing an important role in the tech market’s near-term outlook.
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“Micron is memory. Memory is in everything tech and tech drives markets,” he said in a recent note.
“If the consumer is weak and tech is weak and not offset by AI, something’s not perfect at all-time highs in the market,” he added.
Micron shares were marked 2.6% higher in premarket trading to indicate a Monday opening bell price of $105.20 each.
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