What Happened:

Shares of memory chips maker Micron (NYSE:MU) jumped 18.4% in the pre-market session after the company reported first-quarter results with revenue and EPS outperforming Wall Street's estimates. The topline outperformance was broad-based across business lines and product types. Notably, Micron called out strong AI server demand amid a more favorable operating environment. 

On the other hand, its inventory levels increased. Looking ahead, its revenue, gross margin, and EPS guidance of $6.6 billion, 25.5%, and $0.17 per share for the next quarter crushed analysts' projections. During the earnings release, the company declared a quarterly dividend of $0.115 per share, payable on April 16, 2024, to shareholders as of April 1, 2024. 

Following the results, there was a palpable uplift in sentiments by Wall Street analysts. Notably, Argus Research upgraded the stock's rating from Hold to Buy, citing "rising memory prices, a broad recovery in demand, and the AI-driven demand surge in [the] data center." Overall, this was a fantastic quarter that should have shareholders cheering.

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What is the market telling us:

Micron Technology's shares are somewhat volatile and over the last year have had 10 moves greater than 5%. But moves this big are very rare even for Micron Technology and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The previous big move we wrote about was 20 days ago, when the company gained 6.1% as stocks rallied with the S&P 500 (+0.77%) and NASDAQ (+1.1%), making new 52-week highs to mark a strong start to the new month. Notably, sentiment within the tech space also benefitted from Dell's strong earnings, which highlighted growing demand for its computing solutions, especially its AI-optimized servers. The company provided some color on the growing interest in its AI solutions, adding, "In Q4, we saw strength across a wider range of customers and geographies within an expanding pipeline. AI-optimized server orders increased by nearly 40% sequentially. We shipped $800 million of AI-optimized servers, and our backlog nearly doubled sequentially, exiting the fiscal year at $2.9 billion. Demand continues to outpace GPU supply, though we are seeing H100 lead times improving. We are also seeing strong interest in orders for AI-optimized servers equipped with the next generation of AI GPUs, including the H200 and the MI300X." 

Dell's comments demonstrated the strong interest in these highly specialized computing devices as well as the AI-optimized chips that power them, suggesting it is still early days for innovators within the AI space. This likely drove renewed optimism toward the stocks of some semiconductor manufacturers leading the race to supply AI chips and other related hardware.

Micron Technology is up 36% since the beginning of the year. Investors who bought $1,000 worth of Micron Technology's shares 5 years ago would now be looking at an investment worth $2,546.

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