(Bloomberg) — Micron Technology Inc., the largest U.S. maker of computer memory chips, fell in late trading after its forecast disappointed investors looking to cash in on the artificial intelligence craze.
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Fiscal fourth-quarter sales will be between $7.4 billion and $7.8 billion, the company said in a statement Wednesday. While analysts’ average estimate was $7.58 billion, some projections were as high as $8 billion. Earnings will be about $1.08 a share, less some items, versus a projection of $1.02.
Although Micron is benefiting from the artificial intelligence boom, demand remains weak in its traditional markets, such as personal computers and smartphones. These sectors are only just beginning to recover from a historic drop last year.
Shares fell about 7% in extended trading. Micron was up 67% this year before the close, buoyed by investor expectations that it will be a major beneficiary of AI spending.
In the third quarter, ended May 30, Micron’s revenue increased 82% to $6.81 billion. The Boise, Idaho-based company reported earnings of 62 cents per share, excluding certain items. That compares to estimated sales of $6.67 billion and projected earnings of 50 cents per share.
Micron sells a critical component of AI hardware — high-bandwidth memory — that works with Nvidia Corp.’s processors. to process the data. The memory, known as HBM, can provide information more quickly, helping computer systems develop and run AI models.
Micron sold $100 million worth of new HBM3e chips in the quarter just ended and expects total high-bandwidth product sales to reach “several hundred million dollars” in the current period, then reach several billion in fiscal 2025, which runs through August of that year.
Accelerating the production of this new memory has been a challenge. Because of the difficulty of scaling up factory production – and qualifying chips to work with computer systems – supply effectively has a “handbrake,” said Manish Bhatia, executive vice president of global operations at Micron, in an interview.
Given these constraints, the company expects prices to rise steadily. There is also less chance that the memory market will return to an inventory glut, a problem that has long plagued the industry.
The company is on track to spend about $8 billion on new plant and equipment in fiscal 2024. That budget will increase significantly next year to support construction at sites in Idaho and the state from New York.
The Idaho facility won’t contribute to supply until fiscal 2027, with the New York site planned for the following year, Micron said. But the timing may depend on Micron’s supply and demand analysis.
In a slide presentation, the company said PC industry unit sales remain on track to increase by a low-single digit percentage in calendar year 2024. Smartphone units will gain ‘a low to mid single-digit range. The company expects AI capabilities to help drive demand for phones and PCs by 2025.
CEO Sanjay Mehrotra reiterated his view that 2024 would mark a rebound for the memory chip industry, with record sales coming in 2025.
Micron competes with South Korean companies Samsung Electronics Co. and SK Hynix Inc. in selling chips that provide short-term memory for computers and phones. They also make flash memory, which handles longer-term storage on these devices.
(Updated with executive comments in sixth paragraph.)
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