Micron to incur larger losses this year than earlier estimates hopes to partner with NVIDIA

Micron Technology made an announcement Wednesday regarding its first-quarter financial outlook. The company projected a greater loss for the upcoming quarter than what was initially anticipated. Consequently, the market response led to a 2.4 per cent decline in the company’s share value.

Interestingly, this update comes at a time when Micron is gearing up to boost the production of its new product offerings and actively pursuing a partnership as a supplier to Nvidia.

Hailing from Idaho, Micron is primarily recognized as a chip manufacturer. While the news of an expanded first-quarter loss may seem concerning, the company’s revenue projection for the same period has surpassed the expectations of Wall Street analysts.

This notable performance is attributed to the rising demand for Micron’s memory chips, primarily driven by the thriving artificial intelligence sector.

Micron has announced it is working with Nvidia, a global leader in chip manufacturing, to undergo the qualification process for its latest high-bandwidth memory chips for integration into Nvidia’s computing chips.

This strategic partnership underscores the significance of high-bandwidth memory chips, an industry predominantly dominated by Nvidia’s supplier, SK Hynix. The demand for these chips in the field of artificial intelligence has also boosted investor confidence in Micron’s ability to withstand a gradual recovery in other market segments.

During a conference call with analysts, Micron’s Chief Executive, Sanjay Mehrotra, conveyed the company’s expectation to generate revenue amounting to “several hundred million dollars” from its new high-bandwidth chips in the coming year. Furthermore, the company foresees a return to positive gross margins in the second half of its fiscal year 2024.

Micron’s approach involved abstaining from the current generation of high-bandwidth chips and instead, placing a strategic bet on profiting from the sale of higher-performing chips commencing next year.

Sumit Sadana, Micron’s Chief Business Officer, revealed in an interview with Reuters that their samples, in comparison to those from their competitors, have garnered impressive feedback from customers. These chips offer not only superior performance but also significantly lower power consumption. In fact, some customers remained sceptical until they conducted their own tests.

For the ongoing quarter, Micron anticipates adjusted revenue to be approximately $4.40 billion, with a potential variance of plus or minus $200 million. This projection surpasses the estimated figure of $4.20 billion according to LSEG data. However, the company also forecasts an adjusted loss per share of $1.07, which is slightly steeper than the analysts’ consensus of a 95-cent loss per share.

In retrospect, for the fourth quarter, Micron reported revenues of $4.01 billion, exceeding the anticipated $3.91 billion estimates. This data reaffirms the company’s strategic direction and its growing presence in the high-bandwidth memory chip market, bolstered by its promising collaboration with Nvidia.