Shares of Micron Technology rose 2% in premarket trading on June 26, after the company issued a strong revenue forecast for Q4.

The outlook is driven by increasing demand for memory chips used in AI data centers.

Micron reported a nearly 50% quarter-over-quarter increase in sales of high-bandwidth memory (HBM) chips in Q3.

The company is a key HBM supplier alongside SK Hynix and Samsung.

Micron plans to continue investing in HBM technology to meet demand from major AI chip developers like Nvidia and AMD.

Micron’s stock is up 51.2% year-to-date, outperforming AMD and Nvidia, which are up about 19% and 15%, respectively.

Micron’s 50% quarterly growth in HBM chips signals a fundamental shift in the traditionally cyclical memory market.

Since its founding in 1978, Micron has weathered numerous boom-bust cycles that have defined the memory industry, with the company surviving through strategic innovation like their early 64K DRAM chips and accumulating over 50,000 patents by 2023 1.

Unlike previous memory demand surges that were driven by PCs or smartphones, the current growth is fueled by AI data centers that require exponentially more memory per device, with each AI server containing multiple GPUs that need high-bandwidth memory.

The memory industry’s traditional cyclicality appears to be evolving, as J.P. Morgan projects Micron’s HBM chip sales will reach an $8 billion annualized revenue run rate within one to two quarters, reflecting sustained rather than temporary demand.

This shift is particularly significant for Micron, which has positioned itself as “the only kid on the block shipping HBM3E at scale,” giving the company a strategic advantage in the highest-growth segment of the memory market.

Micron’s acknowledgment that tariffs were a “fairly modest” factor in Q3 highlights the broader geopolitical tensions reshaping the semiconductor industry.

U.S. tariffs exceeding 100% on certain semiconductor-related imports from China are forcing companies to recalibrate their supply chains, with many stockpiling chips in anticipation of further disruptions 2. These trade tensions create both challenges and opportunities for U.S.-based manufacturers like Micron, as building and operating semiconductor facilities in the U.S. is already 30-50% more expensive than in Asia before accounting for tariff impacts 3.

For every $1 increase in semiconductor prices due to tariffs or supply chain disruptions, the cost of end products could rise by approximately $3, potentially affecting demand across consumer electronics and other downstream industries 3.

This complex trade environment may be contributing to Micron’s price-to-earnings ratio of 11.85, compared to SK Hynix’s 6.48, as investors factor in both growth potential and geopolitical positioning in their valuations.

Micron’s introduction of the industry’s first 24GB 8-high HBM3E memory in 2023 showcases how memory manufacturers are racing to develop increasingly sophisticated solutions for AI applications 1.

High-bandwidth memory has become the critical bottleneck for AI performance, with Micron, SK Hynix, and Samsung competing intensely to deliver chips that can achieve bandwidth exceeding 1.2TB/s, which is essential for training and running large AI models.

The competitive landscape is shifting rapidly, with Micron’s status as a U.S.-based manufacturer potentially offering strategic advantages as concerns about supply chain security grow among major AI chip customers like Nvidia and AMD.

This technical race is driving unprecedented investment in manufacturing capabilities, as memory providers must not only develop advanced designs but also scale production capacity to meet the explosive growth in AI server deployments.

The high barriers to entry in HBM manufacturing, requiring both design expertise and manufacturing precision, create a concentrated market where Micron’s ability to ship HBM3E “at scale” represents a significant competitive differentiator that investors are rewarding in the company’s valuation.

By: DocMemory
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