What’s good for memory chipmaker Micron Technology is good for stocks tied to data centers and AI-enabled consumer electronics — two tech trends with robust representation in the Club portfolio. Shares of Micron soared on Thursday following after-the-bell quarterly beats on earnings and revenue and rosy guidance. The Micron pop led to broad-based early strength in semiconductor stocks and other tech names. Despite a cooling off of that rally in afternoon trading, the reasons for the move remain sound: the artificial intelligence boom is driving business at Micron. While not in the portfolio, we’re looking at Micron and its various businesses to get a better sense of the computing environment our chipmakers may be operating in at the moment. Data centers After all, Micron’s dynamic random-access memory (DRAM) solutions, such as high bandwidth memory (HBM), are critical components in AI graphics processing units (GPUs) from Nvidia and Advanced Micro Devices and application-specific integrated circuits (ASICs), the custom chips Broadcom makes for Alphabet and Meta Platforms to handle their AI workloads. All of that hardware goes into data centers, which are being built and rebuilt at furious clips to handle accelerating computing. Micron CEO Sanjay Mehrotra’s post-earnings commentary on HBM demand was particularly striking. “We expect the HBM [total addressable market] TAM to grow from approximately $4 billion in calendar 2023 to over $25 billion in calendar 2025. … As we have said before, our HBM is sold out for calendar 2024 and 2025, with pricing already determined for this timeframe,” he said. “Data center [solid state drive] SSD demand continues to be driven by strong growth in AI, as well as a recovery in traditional compute and storage.” PCs and smartphones Micron also makes memory chips for consumer electronics — specifically personal computers and smartphones. There has been a glut in those chips, but Micron sees continued improvement fueled by artificial intelligence PCs from companies such as Microsoft and AI smartphones from the likes of Apple and others. Best Buy should see gains on both fronts as the place to shop for those devices. “The PC market is in the early stages of a transformation, and we expect a significant shift toward AI-driven functionalities that promise to enhance user experiences and productivity. AI PCs require a higher capacity of memory and storage.” Mehrotra said. “Smartphone customer inventory dynamics are evolving in a manner somewhat similar to that of PC customers, the CEO added. “Smartphone unit volumes in calendar 2024 are on track to grow in the low to mid-single-digit percentage range, and we expect unit growth to continue in 2025.” Bottom line The financials and commentary from Micron increase our conviction that demand for AI data center infrastructure from our own companies — again, that’s Nvidia, AMD, and Broadcom — stands to at least sustain well into 2025. The PC and smartphone demand ramp-up seen by Micron management supports our thesis that as more and more AI solutions come to market, consumers will demand AI-enabled devices. That dynamic will increase and catalyze a faster upgrade cycle than what we’ve seen in the past. That doesn’t mean Best Buy or Apple will suddenly see blowout numbers. They don’t need to. As long-term investors, it’s important to remember that seeing the upgrade cycle — usually about three to four years — shortened by six to 12 months would be a material win for these companies. (Jim Cramer’s Charitable Trust is long NVDA, AMD, AVGO, GOOGL, META, MSFT, AAPL, BBY See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
The Micron Technology headquarters in Boise, Idaho, on March 28, 2021.
Jeremy Erickson | Bloomberg | Getty Images
What’s good for memory chipmaker Micron Technology is good for stocks tied to data centers and AI-enabled consumer electronics — two tech trends with robust representation in the Club portfolio.
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