Micron forecasts blowout earnings on booming AI market, shares rise

Core Viewpoint - Micron Technology forecasts second-quarter adjusted profit significantly exceeding Wall Street expectations due to soaring memory chip prices driven by tight supplies and high demand from AI data centers [1] Group 1: Financial Performance - Micron expects an adjusted profit of $8.42 per share, with a margin of error of 20 cents, compared to analyst estimates of $4.78 per share [1] - Following the profit forecast, Micron's shares rose nearly 15% [1] Group 2: Market Position and Demand - Micron is one of three major suppliers of high-bandwidth memory (HBM) chips, crucial for generative AI model training and deployment, alongside SK Hynix and Samsung Electronics [2] - The company anticipates that memory markets will remain tight beyond 2026, with expectations to meet only 50% to 66% of demand from key customers in the medium term [3] Group 3: Customer Impact and Strategy - Micron's Chief Business Officer indicated that many customers are not receiving the full amount of memory they require, with no customer getting 100% of their requests [4] - The company is negotiating multiyear contracts with key customers and plans to increase its 2026 capital expenditure from $18 billion to $20 billion [4] Group 4: AI Demand Influence - AI-related demand is the primary driver for Micron, enhancing margins for both AI and non-AI products as the company prioritizes supply towards AI-related needs [5] - Strong demand from data centers is fueled by increased spending from large-scale cloud service providers [5] Group 5: Production Adjustments - Micron is adjusting its production facilities to focus on AI data center demand and has decided to dissolve its consumer memory chip business under the "Crucial" brand [6]