Is there a possibility that MU will skyrocket after NVIDIA announces quarterly results on 8/28?
Nvidia's AI GPUs are equipped with a special type of memory known as high bandwidth memory (HBM) to accelerate AI workloads. $Micron Technology (MU.US)$ ) is one of the companies that supply these chips to graphics card specialists. Micron management stated during the June earnings conference call that the company expects to raise “hundreds of millions of dollars” of HBM revenue in the 2024 fiscal year ending this month, and then “raise billions of dollars in HBM revenue in the 2025 fiscal year.”
It's worth noting that Micron has sold out its 2024 and 2025 HBM capacity. However, the company is trying to gain a larger share in this market by expanding its customer base and developing HBM chips that can achieve higher power and efficiency. This is smart considering that the HBM market is projected to generate revenue of 14 billion dollars this year and 20 billion dollars in 2025 from just 5.5 billion dollars last year.
This remarkable growth in the HBM market is directly proportional to rising demand for AI chips, as companies like Nvidia and AMD are trying to pack more HBM memory into their products. The good point is that the rapid growth of the memory market, supported by AI, has turned Micron's fate around, led to a recovery in profit margins, and restored the company's profit growth.
Analysts expect Micron's sales to increase 61% to 25 billion dollars in 2024, followed by 54% to 38.6 billion dollars in 2025. Meanwhile, it is expected that this fiscal year will record a surplus compared to a loss of 4.45 dollars per share in fiscal 2023. However, stock price performance has been unstable recently, and prices have dropped by 25% in recent months. Currently, stock prices are traded at a very attractive level of 12 times future profits.
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