Chip stocks rebound on improved outlook for memory chips

[Photo provided by Micron]

Attention is focused on South Korea’s leading chipmakers Samsung Electronics Co. and SK hynix Co. after U.S. memory chipmaker Micron Technology Inc., one of the companies that generally report earnings the earliest in the industry, posted earnings that beat expectations and the company is confident that demand for memory will increase in the second half of this year, forecasting a market rebound.

On Wednesday, Micron announced its earnings for the third quarter of fiscal year between March and May 2023, reporting sales of $3.75 billion and an operating loss of $1.47 billion.

Sales were down 57 percent on year, but up 2 percent on quarter. Losses also narrowed on quarter. The results also outperform analyst consensus. Initially, analysts had expected Micron to report sales of $3.65 billion and an operating loss of $1.65 billion.

The company’s strong performance is attributed to improved memory demand in some industries and a shift toward higher-value products.

“Generative artificial intelligence is driving higher-than-expected industry demand for memory and storage for AI servers, while traditional server demand for mainstream data center applications continues to be lackluster,” Micron said. “Our double data rate 5 (DDR5) percentage of DRAM shipments has more than doubled from Q2 to Q3.”

The company expects next quarter‘s results to also improve from the previous quarter. The company estimated its sales at $3.9 billion and operating loss at $1.12 billion.

Expectations for Samsung Electronics and SK hynix were also raised following Micron’s earnings release. Investors were drawn to the stocks as they confirmed a recovery in demand for high-end semiconductors, such as DDR5. According to the Korea Exchange, Samsung Electronics shares hit a new 52-week high Thursday and SK hynix also closed at 116,200 won ($88.16), up 1.66 percent from the previous day.