While the memory chip market has been weak, Deutsche Bank’s Sidney Ho upgraded Micron Technology Inc (NASDAQ:MU) stock upon signals that AI is providing the much-needed lift. Ho believes the worst of the downcycle has now passed, given aggressive production cuts that suppliers made and the strong demand on the AI servers front. Micron is scheduled to report earnings after the close of markets on September 27th after reporting its worst ever quarter in March. Meanwhile on Tuesday, Intel Corporation (NASDAQ:INTC) held its Innovation Conference and it presented all the right products, until CFO David Zinser warned of excess data center chip inventories during a meeting with analysts.
Micron’s Recovery On The Back Of Microsoft And Nvidia
The 1-beta DRAM chips that Micron makes are designed for data centers, which are boosting demand for the hardware needed to power large language models and generative AI, like Microsoft Corporation (NASDAQ:MSFT)-backed Open AI’s ChatGPT. With a surge in demand in AI server-build-outs, Ho believes that Micron is well positioned to become a second source Nvidia Corporation (NASDAQ:NVDA) in the second half of 2024.
Micron CFO Also Expressed Optimism In August
Micron’s Chief Financial Officer Mark Murphy showed his optimism regarding pricing trends at the Deutsche Bank Technology Conference, as he observed a bottoming out of prices. Murphy predicted strengthening through the second half of the year, under the assumption that the supply discipline is maintained and volume continues to expand.
Intel Might Be Late To The AI Race, But Shouldn’t Be Ruled Out Just Yet
Zinser’s remarks about a slower-than-expected recovery in the demand for data center chips caused Intel shares to drop by 4.5%. Zinser revealed that the inventory of data center processors is taking longer to clear and projected an "inventory digestion" phase for Intel during the third and likely fourth quarter of the year, before expecting any positive turnaround in the data center business. But earlier on Tuesday, Intel CEO Pat Gelsinger provided very powerful news of launching processors designed to power laptops capable of artificial intelligence that are expected to strengthen the company’s product portfolio. This kind of innovation could potentially offset some of the challenges that Intel's data center business is facing. Last month, Gelsinger reaffirmed that Intel is on track to catch up to Taiwan Semiconductor Manufacturing (NYSE:TSM) in leading-edge technology with its “five nodes in four years” strategy. Intel also reiterated that it is developing its AI supercomputer based on its Gaudi AI accelerators and Xeon processors. Therefore, as far as AI goes, Intel is getting there, but this journey will take time.
All That Optimism Is Yet To Be Justified
All in all, both Micron and Intel affirm that their technological catch-ups and turnarounds remain on track, but they are taking significant capital with only hopes that the PC market has hit bottom and data centers still need to turn to growth for all that optimism to gain solid ground.
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