Micron’s guidance surprises Wall Street as the AI train continues to roll on

Micron Technology’s (NASDAQ:MU) fourth-quarter results topped expectations, but it was the memory maker’s guidance that pleasantly surprised Wall Street, suggesting that the artificial intelligence boom is more than offsetting consumer weakness.

Shares rose 15% in premarket trading, while Western Digital (WDC) and Seagate Technologies (STX), which often trade in tandem with Micron, rose as well.

“Our view of the fundamental story has not changed much as the stock has gyrated – all year, we have remained concerned that prices are rising in a market that seems slightly oversupplied, but that is no different in September than it was in March,” Morgan Stanley analyst Joseph Moore wrote in an investor note. Moore added that much of the upside was related to strength in NAND.

And while there is “clear” evidence of memory oversupply, it has not yet impacted pricing, Moore added.

Moore has an Equal-Weight rating and $114 price target on Micron and said there are “better” risk-rewards in AI and memory, mentioning Nvidia (NVDA), Broadcom (AVGO) and Western Digital, respectively.

Seeking Alpha analyst Gary Alexander was also impressed by the results. “Micron’s incredible (near-doubling) revenue growth helps to solidify the thesis that AI is supporting a multi-year boost in demand,” Alexander said, adding that he believes the “chip sector is oversold.”

Bank of America analyst Vivek Arya said Micron’s supply discipline helped offset inventory-related headwinds and that high-bandwidth memory is a “two horse race” between Micron and South Korea’s SK Hynix.

“Despite increasing macro (softer PC, phone demand) headwinds, MU was able to deliver beat/raise results on the back of solid data center demand, including continued growth in its AI-levered high-bandwidth memory sales,” Arya wrote in a note.

There are also positives for companies like Nvidia, Broadcom, Marvell (MRVL), AMD (AMD) and the semiconductor equipment firms like KLA Corp. (KLAC), based on Micron’s data center strength, Arya added.

He reiterated his Buy rating on Micron and upped his price target to $125 from $110.

Mizuho analyst Vijay Rakesh said the company was aided by strength in both NAND and dynamic random access memory pricing, while high-bandwidth memory pricing is set for 2025, with inventory already sold out.

Rakesh maintained his Outperform rating but slightly lowered his price target to $135 from $145, citing “softer” memory data and lower semiconductor multiples.