Micron’s 65% Surge Puts Lofty AI Expectations Front And Center

(Bloomberg) — Micron Technology Inc.’s more than $62 billion artificial intelligence-driven rally is about to face a test of whether it has jumped too far, too fast.

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Shares of the chipmaker are up roughly 65% this year. Much of that advance has come since Micron’s last quarterly report, with the stock hitting a record high this month. Investors will seek proof of earnings growth and solid future demand in the next release due after Wednesday’s market close. The stock rose as much as 2.1% in early trading Wednesday before erasing most of the gains.

Expectations are lofty. Wall Street anticipates Micron to report $6.7 billion in revenue in the quarter, a nearly 80% jump from the same period a year earlier. A miss could raise the risk of a selloff, with options contracts signaling that the stock could move 12% in either direction in the trading session following earnings, according to data compiled by Bloomberg.

Micron has “ridden the coattails of the whole AI phenomenon,” said Jay Woods, chief global strategist at Freedom Capital Markets. “They’re really going to have to have a story that separates them from their peers.”

Where Micron stands out is in its memory capabilities, used in AI applications, which Wall Street sees driving future revenue. Analyst estimates for quarterly adjusted earnings per share are up 9.5% in the last three months, to 50 cents.

“We expect Micron to deliver a beat-and-raise as we enter one of the largest memory cycles in history,” Hans Mosesmann of Rosenblatt Securities Inc. wrote in a Tuesday note. That growth will be driven by factors that include demand for artificial intelligence applications and a ramp-up in high bandwidth memory chips that in turn reduces supply for traditional Dynamic Random-Access Memory components, he added.

At $225, Mosesmann’s price target for Micron is the highest on Wall Street, according to data compiled by Bloomberg. The company overall has 37 buy ratings, two holds and one sell.

Still, in the event of disappointment, any potential post-earnings weakness could be a good time to snap up shares, according to JPMorgan Chase & Co. analysts led by Harlan Sur.

“We would use any near-term pull-back in the stock to continue to accumulate shares” the analysts wrote in a June 24 note, adding that they see the current memory segment recovery sending the stock up from current levels to $190 to $200 a share.

Tech Chart of the Day

Nvidia Corp. shares jumped 6.8% Tuesday, its best one-day gain since late May, snapping a three-day losing streak that erased more than $400 billion in market value. Shares were slightly lower in early trading Wednesday.

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Earnings Due Wednesday

–With assistance from Subrat Patnaik.

(Updates stock moves at market open.)

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