Micron Surges as Global Memory Chip Shortage Boosts Profit Forecast

Micron's Profit Forecast Soars with Memory Chip Shortage

By Akriti ‌Shah

Dec 18 (Reuters) - Micron Technology shares rose nearly 14% in premarket trading on Thursday, following ‍an outsized ‌profit forecast on the back of a worldwide supply crunch of memory chips amid robust ⁠demand from AI data centres.

A memory shortage across ‌industries - from smartphones to sprawling data centres - has boosted prices, helping Micron forecast second-quarter adjusted profit at nearly double of Wall Street expectations.

"Tight memory supply caused by immense artificial intelligence infrastructure demand is boosting incredible market ⁠pricing for Micron and its memory chip peers," Morningstar analysts wrote in a note.

"The current cyclical upswing is generating tremendous ​shareholder value."

Micron is one of only three major suppliers of ‌high bandwidth memory (HBM) chips, alongside South Korea's ⁠Samsung and SK Hynix. The chips are pivotal for training and deploying generative AI models.

Micron's share price has risen over 160% this year, while Samsung and SK Hyninx's South Korea-listed ​shares have more than doubled and tripled in value, respectively.

Micron is set to add over $30 billion to its market capitalization, if premarket gains hold.

In a conference call with investors on Wednesday, Micron CEO Sanjay Mehrotra said he expects memory markets to remain tight past 2026.

Memory is a ​highly cyclical ‍industry, characteristically experiencing extreme downturns ​and highs with volatile pricing levels.

While analysts differ in their estimates of how long the ongoing upturn, routinely referred to as the "supercycle", might last, Wall Street unanimously agrees supply shortages could extend beyond Micron's estimates despite efforts to bring on more capacity.

The memory chip maker has been retooling its production facilities to prioritize surging demand from AI data centres. It also increased its 2026 capital expenditure ⁠plans to $20 billion, as it ramps up investments to meet booming demand. 

Though Morningstar analysts expect robust pricing to diminish in the long term, ​they see supply tightness persisting well into 2027. J.P. Morgan analysts also expect the supply shortage to last through 2027.

Micron has to strike a balance between allocating wafer capacity to high margin HBM while also providing adequate supply to key customers in ‌other, lower-margin industries, J.P. Morgan analysts said.  

(Reporting by Akriti Shah, Arsheeya Bajwa and Siddarth S in Bengaluru; additional reporting by Danilo Masoni in London; editing by Samuel Indyk, Mrigank Dhaniwala and Krishna Chandra Eluri)