Updated at 12:40 PM EST
Micron Technology shares powered higher in mid-day Monday trading after a top Wall Street analyst issued a bullish note on the memory-chip maker ahead of its quarterly earnings report later in the week.
Micron ( MU ) has underperformed the Nasdaq this year, rising around 24% compared with the benchmark's 32.7% gain as pricing for the tech group's DRAM memory chips, a key consumer-tech product component that makes up around a third of its overall revenue, remains muted.
Investors are betting, however, on Micron's newly established position in the market for HBM, or high-bandwidth-memory, chips, which improve performance and reduce power consumption in AI systems.
Those chips, including a new HBM3E iteration, are now being built into Nvidia's ( NVDA ) H200 processors, as well as its newly developed Blackwell systems. The chips have established Micron as one of just a few global companies that can compete in this fast-growing market.
That place was confirmed earlier this month by $6.1 billion in support from the U.S. government's Chips and Science Act aimed at supporting Micron's plans to invest around $125 billion in new production facilities in New York and Idaho.
“Leading-edge memory chips are foundational to all advanced technologies, and America is rebuilding its capacity to produce these critical capabilities for the first time in almost two decades,” said U.S. Secretary of Commerce Gina Raimondo.
DRAM pricing weakness, tied in part to fading consumer demand, will likely hover over the group's fiscal-first-quarter earnings, expected after the close of trading Wednesday.
Micron is expected to post profit of around $1.72 a share, with revenue rising around 85% from a year earlier to $8.72 billion.
Solid HBM, soft DRAM results seen at Micron
Micron itself forecast revenue in the region of $8.7 billion, with a $200 million margin of error, as well as earnings of around $1.74 a share.
Profit margins, Micron said, would improve by 3 percentage points to 39.5% thanks in part to a heavier mix of higher-priced HBM sales.
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The group estimated the total addressable market for HBM chips, which are also made by South Korea's SK Hynix and Samsung Electronics, rising to around $25 billion in 2025 from $4 billion in 2023.
Citigroup analyst Christopher Danely, who reiterated his buy rating and $150 price target on Micron in a note published Monday, expects the group to post "results and guidance slightly below consensus, driven by legacy DRAM weakness."
Memory is a key tech-market driver: analyst
"While there is excess DRAM inventory in the PC and handset end markets (combined 50% of [fiscal 2024] sales), this should go away this spring and is being offset by strength from the data center end market (35% of F24 sales)," Danely and his team wrote.
The analyst said, however, he remained "bullish on the DRAM recovery given supply/demand dynamics for the coming calendar year."
Elazar Advisors analyst Chaim Siegel, meanwhile, sees Micron's earnings playing an important role in the tech market's near-term outlook.
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"Micron is memory. Memory is in everything tech and tech drives markets," he said in a recent note.
"If the consumer is weak and tech is weak and not offset by AI, something’s not perfect at all-time highs in the market," he added.
Micron shares were marked 6.6% higher in mid-day Monday trading to change hands at $109.29 each.
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