Chip maker Micron beats third-quarter estimates on demand from booming AI, easing glut
- Shares of the company have gained 34 per cent this year on bets that use of its memory chips for generative AI applications will skyrocket
- Last month, China’s cyberspace regulator failed Micron’s products in a security review and barred purchases by operators for key infrastructure
Micron Technology beat estimates for its third-quarter results on Wednesday, powered by demand for its memory chips from the rapidly-growing artificial intelligence (AI) sector and an easing supply glut in its traditional personal computer and smartphone markets.
Shares of the company rose more than 2 per cent in trading after the bell. They have gained 34 per cent this year on bets that use of the company’s memory chips in generative AI services-related servers will skyrocket following the popularity of ChatGPT, the chatbot developed by Microsoft-backed US start-up OpenAI.
“The recent acceleration in the adoption of generative AI is driving higher-than-expected industry demand for memory and storage for AI servers, while traditional server demand for mainstream data centre applications continues to be lacklustre,” Micron chief executive Sanjay Mehrotra said.
Customers continue to reduce excess inventory, leading to improved pricing trends and increased confidence that the industry has passed the bottom for growth and revenue, he added.
After a surge in demand during the pandemic, consumer spending on smartphones and personal computers hit a trough, driving down prices and causing a build-up of inventories.
“We believe the current memory industry inventory correction is now behind us,” said Summit Insights Group managing director Kinngai Chan.
Industry checks indicate some green shoots in the form of demand stabilisation, Chan added, even as demand for PCs, smartphones and servers is expected to remain mixed in the second half of the year.