The ailing chip industry may be on the verge of a turning point, and the AI explosion is at least partly to blame. That’s according to the comments of Micron (MU) CEO Sanjay Mehrotra, who says the memory chipmaker is finally getting back on track for growth after three consecutive quarters of decline.
“We continue to see AI as a long-term driver of data center demand growth,” Mehrotra said in prepared remarks after the company’s second-quarter results were announced on Tuesday.
“We are well positioned to capitalize on the memory and storage opportunities that AI and data-centric computing architectures will bring,” he added.
The semiconductor industry has seen some of its worst days in more than a decade, thanks to the extreme highs and subsequent lows of the pandemic and post-pandemic economic environment.
“The semiconductor memory and storage industry is facing its worst downturn in 13 years, with an exceptionally weak pricing environment that is significantly affecting our financial performance,” said Mehrotra.
However, increased interest in AI could help reverse this as companies across all sectors look to capitalize on the trend.
Micron isn’t the only company poised to benefit from the wild growth of AI. Nvidia (NVDA), which hosted its GTC developer conference last week, will also capitalize on the need for high-performance GPUs for AI systems.
“We’re seeing an acceleration in demand,” Nvidia CEO Jensen Huang said in an interview with Yahoo Finance Live after his keynote address at the conference.
“We are seeing an acceleration in demand for our DGX AI supercomputers. We’re seeing an acceleration in the demand for inference due to generative AI,” added Huang
Competitors AMD (AMD) and Intel (INTC) could also generate some revenue thanks to the hype surrounding generative AI. And they could certainly use it.
Over the past 12 months, Intel is down 35%, Micron is down 19%, and AMD is down 19%. Nvidia is the only company without a double-digit price decline of just 4%.
However, Micron is not just relying on the AI boom. The company is also working to reduce inventories in a bid to return to growth.
“Excluding the impact of inventory write-downs, we believe our days of inventory outstanding (DIO) peaked in the fiscal second quarter and we are close to transitioning to sequential revenue growth in our quarterly results,” he added.
The chip industry was hit hard as consumers cut back on high-tech purchases at the end of the pandemic. It hasn’t helped that some companies are also shedding purchases in the face of rising interest rates.
And as consumers and businesses stopped buying, chipmakers like Micron held more inventory than they needed to. But Micron says it’s managed to reduce its inventory levels enough to meet current demand.
“We have taken significant supply reduction and austerity measures, including implementing a company-wide force reduction,” Mehrotra said. “We now believe that customer inventories have decreased in several end markets and we see a gradual improvement in the supply-demand balance over the coming months.”
From Daniel Howley, technical writer at Yahoo Finance. follow him @DanielHowley
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Source : finance.yahoo.com