Micron’s top estimates are up to $22 billion in customer deals for memory chips
Written by Zaheer Kachwala and Anhata Rooprai
June 24 (Reuters) – Micron forecast better-than-expected quarterly profit and revenue on Wednesday and said its customers committed $22 billion to key memory chips, sending its shares up 12% in after-hours trading.
The forecast — and third-quarter results that beat Wall Street estimates — underscore how AI-driven shortages are forcing Micron’s big data center customers to subsidize capacity, reshaping the memory market.
Micron, a key supplier of Nvidia’s AI processors, benefited from this shortage.
The company, the only US-based manufacturer of high-bandwidth memory chips used alongside Nvidia’s AI processors, has seen demand for these chips far outpace its production capacity, allowing the company and rivals SK Hynix and Samsung Electronics to charge a premium for their products.
Hynix is also exploring a US listing, underscoring investors’ efforts to tap into AI-driven memory development.
“We expect strong conditions to continue beyond calendar 2027 due to AI-driven demand across all segments coupled with supply constraints,” Micron CEO Sanjay Mehrotra said in a prepared statement. He added that the company has no idea when the memory supply will catch up with the growing demand.
The chip maker also explained a change in business model aimed at making demand smaller per cycle. The $22 billion in commitments will come from 16 strategic customer agreements Micron has signed, spanning the data center, consumer and automotive markets, with take-or-pay commitments, deposits and price floors designed to lock in supply and protect margins.
Micron also said the remaining performance obligations — a key indicator of future contract revenue — on customer agreements it has entered into so far are about $100 billion.
“The size and scale of built-in AI has always been underestimated and memory will continue to command supply chain pricing,” said Daniel Newman, CEO of technology research firm Futurum Group.
CAN PRICE POWER HOLD?
Micron’s stock has more than tripled this year, though it fell 13% on Tuesday as part of a broader selloff, boosting its market value to more than $1 billion.
The rebound comes on the heels of a brutal industry-wide downturn in 2023, when overstocking crushed prices, but some analysts doubt the pricing power could extend beyond AI-driven products to the broader market.
The increase in Micron’s stock on Wednesday after the results, and the jump in Qualcomm’s shares, boosted the recent gains in Western Digital, Sandisk, Seagate Technology, Arm Holdings, Marvell, Broadcom, Applied Materials, ASML and other chip manufacturers, generating more than 400 billion in stock market value.
