Why Are Micron Technology (MU) Shares Soaring Today
What Happened:
Shares of memory chips maker Micron (NYSE:MU) jumped 6.1% in the afternoon session after stocks rallied with the S&P 500 (+0.77%) and NASDAQ (+1.1%), making new 52-week highs to mark a strong start to the new month. Notably, sentiment within the tech space also benefitted from Dell's strong earnings, which highlighted growing demand for its computing solutions, especially its AI-optimized servers.
The company provided some color on the growing interest in its AI solutions, adding, "In Q4, we saw strength across a wider range of customers and geographies within an expanding pipeline. AI-optimized server orders increased by nearly 40% sequentially. We shipped $800 million of AI-optimized servers, and our backlog nearly doubled sequentially, exiting the fiscal year at $2.9 billion. Demand continues to outpace GPU supply, though we are seeing H100 lead times improving. We are also seeing strong interest in orders for AI-optimized servers equipped with the next generation of AI GPUs, including the H200 and the MI300X."
Dell's comments demonstrated the strong interest in these highly specialized computing devices as well as the AI-optimized chips that power them, suggesting it is still early days for innovators within the AI space. This likely drove renewed optimism toward the stocks of some semiconductor manufacturers leading the race to supply AI chips and other related hardware.
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What is the market telling us:
Micron Technology's shares are somewhat volatile and over the last year have had 9 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 11 months ago, when the stock gained 6.6% on the news that the company reported earnings for the latest quarter. While the results trailed the consensus estimates for revenue and operating profits, Wall Street analysts noted that the semiconductor company had faced a steeper slump than anticipated, but signs of a rebound are emerging. The outlook from the company was optimistic, with Sanjay Mehrotra, the chief executive, affirming his "confidence" in the long-term demand scenario and envisaging "gradual improvements" in the industry's supply-demand equation. The stock reaction suggests that the market is putting more weight on longer-term risk/reward than near-term cyclical results.
Micron Technology is up 15.5% since the beginning of the year. Investors who bought $1,000 worth of Micron Technology's shares 5 years ago would now be looking at an investment worth $2,288.
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