The beaten down chip industry may be on the verge of a turnaround, and the AI explosion is at least partly to thank. That’s according to remarks by Micron (MU) CEO Sanjay Mehrotra, who says that the memory chip maker is finally returning to growth after three consecutive quarters of declines.
“We continue to see AI as a secular driver of demand growth in the data center,” Mehrotra said in prepared remarks following the company’s Q2 earnings announcement on Tuesday.
“We are well positioned to capture the memory and storage opportunities that AI and data-centric computing architectures will provide,” he added.
The semiconductor industry is coming off of 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 the last 13 years, with an exceptionally weak pricing environment that is significantly impacting our financial performance,” Mehrotra said.
The jump in interest around AI, however, could help turn that around as businesses across sectors look to take advantage of the trend.
Micron isn’t the only company that stands to benefit from the wild growth in AI. Nvidia (NVDA), which hosted its GTC developers conference last week, is also set to capitalize on the need for high-powered GPUs to power AI systems.
“We are seeing an acceleration in demand,” Nvidia CEO Jensen Huang told Yahoo Finance Live during an interview following his keynote at the conference.
“We’re seeing an acceleration of demand for our DGX AI supercomputers. We’re seeing an acceleration of demand for inference, because of generative AI,” Huang added
Rivals AMD (AMD) and Intel (INTC) could also stand to pick up some sales thanks to the hype around generative AI. And they could certainly use it.
Over the last 12 months, shares of Intel are off 35%, shares of Micron are down 19%, and shares of AMD have dropped 19%. Nvidia is the only one without a double-digit drop in share price, falling just 4%.
Micron isn’t just banking on the AI boom, though. The company is also working to bring down inventory levels to return to growth.
“Excluding the impact of inventory write-downs, we believe our balance sheet days of inventory outstanding (DIO) has peaked in fiscal Q2, and we are close to a transition to sequential revenue growth in our quarterly results,” he added.
The chip industry took a massive hit as consumers cut back on purchasing high-tech items during the tail end of the pandemic. It hasn’t helped that some businesses are also pulling back on purchases amid rising interest rates.
And as consumers and businesses stopped buying, chipmakers like Micron were left holding more inventory than necessary. But Micron says it’s managed to pare back its inventory levels enough to meet the current level of demand.
“We have taken substantial supply reduction and austerity measures, including executing a companywide reduction in force,” Mehrotra said. “We now believe that customer inventories have reduced in several end markets, and we see gradually improving supply-demand balance in the months ahead.”
By Daniel Howley, tech editor at Yahoo Finance. Follow him @DanielHowley
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