Micron just dished out a prime example of how the AI boom is creating winners and losers in the chip sector. While the memory maker's fiscal Q3 beat topped revenue estimates, its stock still got clobbered after investors digested the finer print, dropping approximately 7% or $10 in after-hours trading.
On the surface, Micron served up mouth-watering numbers, including $6.81 billion in revenue easily clearing the $6.67 billion Wall Street target. Earnings per share topped forecasts at 62 cents adjusted versus 51 cents expected.
But despite those beat-and-raise optics, Micron shares plunged over 7% after hours as traders seemingly shrugged at its Q4 revenue outlook. The $7.6 billion midpoint forecast matched analyst projections, failing to satisfy the elevated expectations baked into Micron's scorching 2024 rally.
Make no mistake though - the real story here is Micron's emergence as a prime AI semiconductor superstar. Thanks to sizzling demand for its high-bandwidth memory (HBM) chips, CEO Sanjay Mehrotra revealed the entire 2024 supply is already sold out with most of 2025 also allocated!
Those prized HBM chips are a key ingredient powering the latest AI processors from red-hot leaders like Nvidia. So while stale smartphone and PC markets weigh on other segments, Micron's data center business skyrocketed 50% quarter-over-quarter on AI mania.
As Mehrotra bluntly stated, "We are gaining share in high-margin products like HBM and our data center SSD revenue hit a record high, demonstrating the strength of our AI product portfolio."
Micron is the ultimate "pick and shovel" play for the AI gold rush, winning big regardless of which AI platform ultimately dominates. With pricing power and backlogs galore, the chip darling expects its AI-oriented offerings to keep fetching higher premiums.
Of course, executing on those lucrative tailwinds is still priority number one. Micron's stumble likely reflected some fears that production hiccups could derail the AI gravy train before it truly leaves the station.
But for now, Micron is squarely centered in the AI chip frenzy's bullseye. As traders digest whether its outlook is conservative or merely realistic, one thing is clear - AI will create plenty more volatile roller coaster rides across the semiconductor universe.
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