Micron (MU) Stock Surges as Nvidia Confirms Soaring Memory Costs

Key Takeaways

• Nvidia’s CFO Colette Kress stated memory costs have surpassed previous projections and will continue rising through next year
• Supplier commitments from Nvidia reached $279 billion, representing a significant increase from last quarter’s $119 billion
• According to Susquehanna analysis, DRAM pricing may surge beyond 50% this quarter, while NAND flash could increase up to 60%
• Analyst consensus for Micron places the average price target around $1,525, with KeyBanc’s projection reaching $1,750
• Micron delivered unprecedented Q3 revenue of $41.46 billion and forecasts roughly $50 billion for the upcoming quarter

Shares of Micron Technology (MU) finished Wednesday’s session at $938.40 before climbing an additional 3.09% in after-hours trading Thursday to approximately $967.35, following Nvidia’s earnings discussion that highlighted escalating memory costs.

Micron Technology, Inc., MU

During Nvidia’s quarterly earnings presentation, CFO Colette Kress disclosed that memory cost increases had “surpassed earlier projections” and would continue climbing into the following year. The graphics chip maker revealed quarterly revenue reaching $96.2 billion, representing a year-over-year doubling, while gross margins faced compression from escalating memory expenses.

Nvidia CEO Jensen Huang offered no indication of curtailing memory expenditures. He emphasized the company’s collaboration with all three primary suppliers—Micron, Samsung, and SK Hynix—to expand production capacity.

The total supplier obligations from Nvidia have reached $279 billion, marking a substantial jump from the prior quarter’s $119 billion. Memory components represent more than half of these supply allocations, according to William Blair’s analyst Sebastien Naji.

“The memory shortage we’re experiencing today stems largely from the AI infrastructure expansion,” Kress explained during the earnings discussion.

Research from Susquehanna released Monday indicated DRAM pricing could climb over 50% during this quarter. NAND flash prices may surge by as much as 60%. Gartner forecasts global semiconductor revenue will reach approximately $1.6 trillion by 2026, with the memory sector alone nearing $837.3 billion.

Analyst Community Increases Projections

BMO Capital initiated coverage on August 21 with an Outperform designation and $1,300 price objective. KeyBanc maintains an Overweight stance with a $1,750 projection. The Wall Street consensus mean currently stands near $1,476, representing approximately 60% upside from present levels.

However, not all analysts share this optimism. TipRanks five-star investor Louis Gerard shifted MU to Hold, citing a GAAP price-to-earnings multiple of 21.99x, versus SK Hynix at 7.33x and Samsung at 12.14x. Gerard contended the earnings surge reflected pricing power more than volume growth.

Stifel’s analyst Ruben Roy observed that Nvidia refrained from fully transferring memory cost increases across its complete product range, instead absorbing some expenses internally. This approach alleviates concerns regarding potential resistance from Nvidia or its client base.

Leadership Restructuring at Micron

Micron revealed executive restructuring on Wednesday. Manish Bhatia assumes the position of president and chief operating officer, managing manufacturing operations, customer requirements, and pricing strategy. Scott DeBoer transitions to president and chief technology and products officer, directing memory and storage innovation. Sumit Sadana shifts to a senior adviser capacity.

CEO Sanjay Mehrotra characterized the present memory market conditions as foundational, supported by $22 billion in customer prepayments spanning 16 strategic supply contracts.

“This is no longer about commodities. We’re delivering high-value solutions,” Mehrotra stated.

Micron achieved historic Q3 revenue of $41.46 billion and projects approximately $50 billion for this quarter, with adjusted gross margin approaching 86%. The company’s HBM4 products are currently shipping at scale, while HBM4E development advances toward a 2027 launch. The upcoming earnings announcement is scheduled for September 30, with projected EPS of $31.26 compared to $3.03 in the prior year.

The post Micron (MU) Stock Surges as Nvidia Confirms Soaring Memory Costs appeared first on Blockonomi.