These two semiconductor companies could surge higher thanks to recent AI-related developments.
The artificial intelligence (AI) craze has turned out to be a massive catalyst for many companies in the past year or so, which is evident from the huge stock price gains clocked by the likes of Nvidia, Palantir Technologies, and others who are benefiting from the adoption of this technology.
Shares of Nvidia, for instance, are up 92% in 2024 already thanks to the terrific growth from selling its AI chips. Palantir, meanwhile, is up more than 42% this year following a sharp surge in the wake of its latest quarterly results. And now, it looks like Broadcom and Micron Technology are set to join the bandwagon as well and witness a parabolic jump in their share prices.
Broadcom stock recently got a shot in the arm following an investor event called Enabling AI in Infrastructure. During this event, Broadcom revealed that it now has three customers for its custom AI chips. For comparison, on its earnings conference call earlier this month, Broadcom management said it is witnessing strong demand for our custom AI accelerators at our two hyperscale customers.
Broadcom’s custom AI processors were already being used by the likes of Meta Platforms and Alphabet, and speculation indicates that the new addition could be Amazon, Apple, or TikTok parent company ByteDance. It is worth noting that Broadcom was already enjoying rapid growth in AI chip sales before this new customer came on board. The chipmaker’s AI revenue quadrupled on a year-over-year basis in the previous quarter to $2.3 billion.
What’s more, Broadcom was expecting to finish fiscal 2024 with more than $10 billion in AI revenue even before the new customer came on board. Now that the company expects to ramp up the production of AI chips for its new customers this year itself, there is a good chance that it could very well exceed its forecast.
Micron Technology stock jumped 14% following its second-quarter fiscal 2024 earnings report (for the quarter ended Feb. 29, 2024), which was released on March 20. AI played a central role in Micron’s surge as the growing demand for memory chips used in AI servers, personal computers (PCs), and smartphones led to a big year-over-year jump in the company’s revenue and earnings.
The chipmaker’s revenue shot up 58% year over year to $5.82 billion. It swung to an adjusted profit of $0.42 per share from a loss of $1.91 per share in the same period last year. Analysts would have settled for a loss of $0.25 per share on $5.35 billion in revenue. The good part is that Micron’s growth is set to accelerate in the current quarter. Its revenue guidance of $6.6 billion points toward year-over-year growth of 76%.
As already mentioned, Micron is on track to take advantage of the growing adoption of memory chips in multiple niches. For instance, in AI servers, the company’s high-bandwidth memory (HBM) is being deployed by Nvidia. The graphics specialist recently announced its next-generation Blackwell AI GPUs, and Micron points out that these chips carry 33% more HBM.
Meanwhile, Micron says that AI-enabled PCs could be equipped with 40% to 80% more DRAM content as compared to usual PCs. On the other hand, Micron expects AI-capable smartphones to carry 50 to 100% greater DRAM content compared to non-AI flagship phones today. All this indicates that the memory market has a bright future thanks to AI, and Micron is benefiting from the same.
