The recovery cycle of chips has started. Can Micron(MU.US) add fuel to the fire?

U.S. largest memory chip maker Micron Technology (MU.US) will report its fiscal 2025 first-quarter earnings after the U.S. market closes on Wednesday (early Thursday in Beijing). Wall Street expects Micron to post revenue of $8.72 billion in the quarter, up 84% YoY, and a profit of $1.84 billion, or $1.58 per share, compared with a loss of $1.23 billion, or $1.12 per share, a year ago.

Upcycle in the chip industry quietly begins

Data from Micron's last quarter and its outlook suggest that the company has weathered the worst of the industry cycle and is moving back toward profitability, especially aided by the surge in spending on AI. Micron's CEO Sanjay Mehrotra noted that demand for high-end memory chips used in data centers to help develop AI software/applications is exceptionally strong.

Analysts expect the company's DRAM business to generate revenue of $5.92 billion in the quarter, up 72.9% YoY; and its NAND business to generate revenue of $2.6 billion, up 111.5% YoY.

Data from Counterpoint showed that the global semiconductor industry's revenue grew 17% YoY to $158.2 billion in the third quarter of 2024, driven by the demand for AI technology and the recovery of the memory industry. Nvidia and AMD saw significant growth in the AI field and became the main beneficiaries. This trend is expected to continue in the fourth quarter of 2024, especially with the help of new product releases.

Secures $6 billion federal grant

One week before the earnings release, Micron Technology received a federal government grant of up to $6.165 billion to produce semiconductors in the U.S. under the 2022 Chips and Science Act.

The U.S. Commerce Department said the funding would support Micron's "20-year vision" to invest about $100 billion in New York and $2.5 billion in Idaho to build new factories and create about 20,000 jobs.