Micron’s Latest Guidance Supports Multiple Tech Holdings

Earlier this week, we shared that quarterly results from memory company Micron MU were on our watchlist of items for this week, given the use of its memory products across end markets that we have exposure to. These primarily include AI and data centers, PCs, smartphones and auto, but also semiconductor capital equipment.

While Micron delivered favorable results, including November quarter revenue that climbed more than 12% sequentially, MU shares are under pressure on Thursday following what can only be called a "wide miss" with its outlook for the current quarter.

Not only did its EPS come in way under the Wall Street consensus, but the implied revenue guidance of $7.7 billion to $8.1 billion for the January 2025 quarter fell short of the $8.94 billion consensus. Yet, when we compare it to the January 2024 quarterly revenue of $5.824 billion, that outlook still points to more than 30% gains. Compared to the November quarter revenue of $7.75 billion, the guidance for the January 2025 quarter offers some upside, just not as much as the market was expecting.

Micron on AI, Data Centers, PCs and Smartphones

While Micron called out the continued strength in its AI and data center business, which was up 400% year over year in the November quarter, it shared customers continued to work down excess inventories in the PC and smartphone markets. However, in discussing its outlook for those markets, Micron shared it still sees smartphone unit volumes up mid-single digits this year and rising further in 2025. In other words, its outlook matches the consensus forecast, and that reassurance is helping lift our shares of Apple AAPL and Universal Display OLED. We also have to question if the issues impacting Micron’s guidance are more Micron-specific issues than industry-wide ones.

We are not seeing that flow through to our shares of Qualcomm QCOM, which are down modestly and the disconnect likely reflects Micron’s comments about the PC market and delayed upgrade cycle. Micron now sees a flattish PC market this year in terms of units and a slower start to the upgrade cycle. However, with the end of life for Windows 10 in October 2025 and an aging install base, Micron’s take is we will see a stronger 2H 2025 for the PC market with 2025 PC shipments up mid-single digits compared to this year.

In our view, it is Micron’s comment about the slower start to the upgrade cycle that is making the difference on Thursday between the move lower in QCOM shares and the move higher in OLED and AAPL shares. However, we would point out that AI PC-related revenue at Qualcomm today is relatively minor and the larger opportunity is tied to the expanding number of program wins garnered by Qualcomm as the upgrade cycle accelerates. While the start of that cycle may be off by a quarter or two, it doesn’t diminish the longer-term opportunity in AI PCs. Arguably, in the near term, Micron’s outlook for the smartphone market carries more weight when it comes to QCOM’s revenue stream.

Recognizing that and the revenue diversification to come at Qualcomm, we will remain owners of the shares. As we get confirmation of that diversification and favorable data points for the smartphone and AI PC market, we’ll contemplate any additional moves with QCOM shares.

As it relates to OLED shares, they were oversold following Wednesday's market action, but the rebound today has moved them out of that. While the current risk-to-reward level is more than favorable, if you read our opening comments today, we would suggest holding off until the market digests the November PCE data out tomorrow before the market open.

Before we move on, Micron’s comments about AI and data center strength in the quarter and strong order flow reinforce our stance on Marvell MRVL and Nvidia NVDA shares.

Micron and Semi-Cap Spending

As part of its guidance, Micron shares that it expects to spend $14 billion, plus or minus, on capital spending during this fiscal year compared to the $8.12 billion it did in fiscal 2024. Having spent $3.13 billion in the November quarter and forecasting $3 billion to be spent in the current quarter, this suggests a meaningful step up in Micron’s April and July 2025 quarters. Some of this is likely tied to the early December CHIPs Act award of $6.1 billion and signals a pickup in semi-cap demand in the quarters ahead.

Continued strength in AI and data center chips and the improving outlook for smartphones and PCs in 2025 likely means Taiwan Semi TSM will also be spending more on equipment next year compared to this year. We see that supporting Semi’s semiconductor capital equipment sales forecast of $121 billion in 2025 and $139 billion in 2026 compared to $113 billion this year, which marked a new industry record. If we were not seeing rising demand for semi-cap equipment, that would give us a reason to question owning shares of Applied Materials AMAT in the Portfolio. Whether it's formal forecasts or rising chip industry capacity levels, that’s not what we’re seeing and that means we will stay the course with AMAT shares.

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At the time of publication, TheStreet Pro Portfolio was long AAPL, OLED, QCOM, MRVL, NVDA and AMAT.