It’s been little more than a year since the latest iteration of artificial intelligence (AI) went viral, and we’re only just beginning to see the fruits of this breakthrough technology. Early indications suggest one of the biggest benefits will be the time and money savings from increases in productivity, as AI automates mundane and time-consuming chores. Businesses of all kinds are exploring how to best adopt this technology, but it’s still early days.
Micron Technology(NASDAQ: MU) CEO Sanjay Mehrotra was clear about the long runway ahead. “We are in the very early innings of a multiyear growth phase driven by AI as this disruptive technology will transform every aspect of business and society,” he said.
That’s a bold assertion but one that’s increasingly being echoed by the brightest minds in technology, though estimates of its value are diverse. Generative AI is expected to be a $1.3 trillion market by 2032, according to Bloomberg Intelligence. Global management consulting firm McKinsey & Company is more bullish, estimating a range of between $2.6 trillion and $4.4 trillion annually. What is pretty clear, however, is that the opportunity is vast.
It’s also pretty clear that Micron Technology stands to reap a portion of this growing AI windfall.
Image source: Getty Images.
Multiple ways to profit
Micron Technology may not be a household name, but the company provides a number of components that are vital to AI processing, particularly in the data center. Micron is a leading supplier of memory (DRAM) and storage (NAND) chips — and each one helps accelerate the performance of Nvidia‘s GPUs, which are the gold standard in data center processing.
In November, Nvidia announced that it had chosen Micron’s HBM3E (High Bandwidth Memory 3E) chip, which would be integrated into its H200 Tensor Core GPUs, providing “advanced memory to handle massive amounts of data for generative AI and high-performance computing workloads,” according to the press release. Nvidia went further, saying that the HBM3E helped ramp up the performance of the H200, which delivered “nearly double the capacity and 2.4 times more bandwidth compared with its predecessor, the Nvidia A100.”
These data center workhorse processors are scheduled to begin shipping in the second quarter of 2024. Last month, Micron announced it had begun volume production of the HBM3E, which the company said provides superior performance while using about 30% less power than competing offerings.
As the number and size of data center workloads continue to scale, energy consumption is becoming a key consideration, which no doubt was a factor when Nvidia chose Micron’s power-miserly chips.
The enormous opportunity of AI
The secular tailwind of AI is only just beginning to show in Micron’s results. For the company’s fiscal 2024 second quarter, which ended Feb. 29, Micron generated revenue of $5.82 billion, which jumped 58% year over year and 23% sequentially. The company noted that surging demand “drove robust price increases.” This helped the cyclical chip company return to profitability sooner than expected, generating adjusted earnings per share (EPS) of $0.42.
Management expects the company’s growth to accelerate. For the third quarter, Micron is guiding for revenue of $6.6 billion, which would represent 76% year-over-year growth. At the same time, its adjusted EPS is expected to climb to $0.45.
Micron noted that its HBM supply is completely sold out for calendar 2024, as is the vast majority of supply for 2025. This helps illustrate the surging demand created by the accelerating adoption of generative AI.
Helping drive that demand is the ongoing data center upgrade cycle, as existing servers simply don’t have the computational horsepower to handle the demands of generative AI. Bernstein analyst Toni Sacconaghi has crunched the numbers and suggests the AI server market will grow 75% annually over the next three years, calling the resulting upgrade cycle “unprecedented.” Furthermore, as AI begins to expand from data centers to other devices, including personal computers and smartphones, demand for Micron’s other solutions is also expected to surge.
Excitement about the prospects of AI has driven Micron Technology to new heights, with a commensurate increase in its valuation. That said, the stock is still trading for roughly 4 times next year’s sales. While that’s a premium compared with the multiple of 3 for the S&P 500, the accelerating demand for AI has resulted in unprecedented demand for Micron’s storage and memory solutions.
As a leading supplier of processors used to accelerate AI, Micron could represent a once-in-a-generation investment opportunity.
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NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
