Some people believe that the key to happiness is good health and a bad memory.
However, Sanjay Mehrotra doesn't quite see it that way.
Mehrotra is the CEO of Micron Technology (MU) , which produces computer memory and that's paramount in the ever-expanding universe of artificial intelligence.
"We are in the very early stages of a multi-year growth phase catalyzed and driven by generative AI, and this disruptive technology will eventually transform every aspect of business and society," Mehrotra told investors during the company's first-quarter earnings call in December.
He said that memory is "at the heart of GPU-enabled AI servers, and we are already seeing strong demand driven by early deployment of AI solutions, which will only accelerate over time."
"Micron is well positioned to leverage this growth, having executed the most robust set of new technology and product introductions in our 45-year history," Mehrotra added.
Nvidia (NVDA) is currently the AI kingpin as it dominates high-end artificial-intelligence-chip making.
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Environmental concerns
This is working out very well for Micron, which began mass producing high-bandwidth-memory, or HBM, memory chips to be used in Nvidia's AI GPUs.
The company said that the shipments could generate "several hundred millions of dollars of HBM revenue in fiscal 2024," with continued growth in 2025.
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Micron has said that its HBM addition not only improves performance, but also helps reduce overall power consumption, a key factor in enabling AI strategies to develop, given their massive computing needs.
Alex de Vries, a researcher at VU Amsterdam and the creator of the tech and economy site Digiconomist, has said that powering AI could use as much electricity as a small country.
"There’s a fundamental mismatch between this technology and environmental sustainability,” de Vries told The New Yorker.
He said that the only thing that’s realistic in terms of policy, at least in the short to medium term, is disclosure requirements.
“It’s taken a very long time before we got there with regard to cryptocurrencies, and I’m disappointed that we haven’t gotten there sooner with AI." de Vries said. "It’s like we saw what cryptocurrency mining could do, and we totally forgot about it."
Micron is scheduled to report second-quarter results on March 20. Analysts surveyed by FactSet expect the company to post a loss of 26 cents on revenue of $5.3 billion.
A year earlier, the company reported a second-quarter loss of $1.91 on $3.7 billion in sales.
Over the last few days, several analysts have been adjusting their stock price targets for Micron ahead of the company's earnings release.
On March 12, Wedbush analyst Matt Bryson raised his price target for Micron to $103 from $95 while retiring his outperform rating.
"Since last summer, management has provided consistently optimistic commentary around anticipated progress with HBM in light of the technology being a derivative of their highly successful standard DRAM nodes," he said in a note to investors.
He added that he would “expect management to at least reiterate (if not build upon) prior commentary suggesting hundreds of millions in HBM shipments this year.”
Increasing market share
The analyst said that he believed Micron’s efforts to penetrate enterprise/cloud accounts have been more successful in recent quarters, and "moreover, we see these efforts as likely to benefit moving forward from Micron’s success the last few NAND cycles."
Citi analyst Christopher Danely reiterated his buy rating on Micron and lifted his price target to $150 from $95.
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The analyst said that he expected the company to post upside to consensus and increased guidance for the third quarter, given strong DRAM pricing and shipments of higher-priced, higher-margin, HBM which is shipping with Nvidia Al systems.
The analyst noted that the $150 price target is 15 times fiscal 2026 earnings estimates of $10.03 per share.
While this may be a 50% premium to the company's historic range, Danely said that Micron should get a premium given increasing Al exposure and other Al-exposed stocks such as Broadcom (AVGO) and AMD (AMD) have seen a 100% increase in their multiples.
TD Cowen Krish Sankar raised his price target on Micron Technology to $120 from $100, while maintaining his outperform rating, according to Markets Insider.
Sankar noted Micron’s potential growth in the HBM market, where he expects the company to increase its share significantly.
His estimates suggest that Micron could capture over 25% of the HBM market share next year, up from the current 10-15%.
He also said the anticipated qualification with B100 is seen as a catalyst that could further enhance Micron’s valuation, with a potential target of $150 per share if these market share gains are sustained
If Micron can maintain its momentum in HBM market share, driven by a high compound annual growth rate of related earnings, Sankar said the company’s valuation could benefit significantly.
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