Micron's Memory Boom Reverses a Global Chip Selloff

Micron Technology reported quarterly revenue of about $23.86 billion and earnings per share well above analyst expectations, according to its results filed on June 24. The memory maker guided to roughly $33.5 billion in revenue for the current quarter, a figure far above what analysts had modeled, and said its high-bandwidth memory used in artificial intelligence (AI) systems is sold out for the year.

The report reversed a sharp technology selloff earlier in the week. The Financial Times reported that Micron's profits reassured investors after a global decline in chip shares. The Israeli financial outlet Globes reported that Nasdaq futures rose more than 2% and a major semiconductor exchange-traded fund (ETF) gained more than 5% in early trading, while South Korea's KOSPI index rose more than 5% after falling close to 10% earlier in the week. Globes also noted that Micron signed long-term supply contracts worth about $22 billion, evidence that the construction of AI computing infrastructure is continuing.

Micron's stock rose about 15% in extended trading on June 24, and the company's market value has moved above $1 trillion over the past year. Management said it can currently fill only half to two-thirds of memory orders from its largest customers.

From a sound-money perspective, the episode is a reminder that the AI investment cycle is being financed in an era of abundant credit. Demand that appears unlimited while money is cheap can later prove to be misallocated capital once financing conditions tighten, and a single supplier's orders are a fragile basis for valuing an entire industry.