Wall Street Takes a Look at What’s Ahead for U.S. Chipmakers (Video)

Micron (MU) is the first chipmaker to report quarterly results this earnings season. Its report, due after the close of trading Wednesday, will provide insight into how the semiconductor sector is faring amid high expectations on Wall Street.

Micron’s memory business has enjoyed a renaissance in the past year as big tech companies pour billions into the semiconductor sector, buying equipment to power AI-powered data centers.

Micron is unique in that it works with, not competes with, industry superpower Nvidia (NVDA). Micron supplies memory chips for Nvidia’s highly coveted GPUs.

Wall Street is expecting Micron to post quarterly revenue 90% higher than last year — after analysts slightly lowered their expectations by 0.3% from a month earlier. Here’s a breakdown of analyst forecasts, according to Bloomberg consensus estimates:

• Income: $7.66 billion (Micron forecast: $7.4 billion-$7.8 billion) vs. $4.01 billion in Q4 2023

• Adjusted earnings per share: $1.11 (Micron forecast: $1 to $1.16) vs. a loss of $1.07 in Q4 2023.

Shares of the chip maker rose 2% on Wednesday.

Investors have dizzyingly high and steadily rising standards for AI chipmakers, which has often left them disappointed in recent months. Micron’s third-quarter earnings beat didn’t have much of an impact on investors in late June.

Instead, the stock fell sharply on fourth-quarter guidance that met (not beat) Wall Street expectations. Nvidia shares also fell after reporting quarterly earnings in late August. Despite more than doubling profits and beating sales estimates, investors wanted more from the semiconductor superpower. Nvidia has since rebounded, but Micron shares are down more than 30% from three months ago.

Nearly 93% of Wall Street analysts covering Micron recommend buying the stock. On average, they predict the stock will rise more than 50% over the next year to $143.94. Still, their views on Micron are mixed.

Morgan Stanley’s Joseph Moore thinks softer expectations on Wall Street could help boost the stock after the results. “MU stock could bounce back from earnings given the near-term weakness, especially if enthusiasm returns to AI beneficiaries,” he wrote in a note to investors earlier this week. Moore, however, maintained his Equal Weight rating on Micron and calls the stock “fundamentally overpriced.”

JPMorgan, on the other hand, maintained its Overweight rating on the stock and said it “will still be one of our top picks in the semifinals next year.”

The PHLX Semiconductor Sector Index (^SOX) has begun to recover from a decline earlier this month as tech stocks rallied on a U.S. Federal Reserve rate cut and a broad stimulus package from China’s central bank. The index is up nearly 6% over the past week. Micron has been part of that trend, rising nearly 10% over the period.

The company is also set to benefit from legislation awaiting President Joe Biden’s signature that would ease environmental requirements for microchip projects funded by the CHIPS and Science Act. Micron is one of the largest recipients of CHIPS Act funding, and the Building Chips in America Act passed by the U.S. House of Representatives on Monday would allow the company to more quickly access more than $6 billion in federal grants for its planned microchip plants in Idaho and New York.

Laura Bratton is a reporter for Yahoo Finance.

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