Wall Street will get a glimpse into what's ahead for US chipmakers

Micron (MU) is the first chipmaker to report quarterly results this earnings season. Its report, scheduled for release after the bell on Wednesday, will provide insight into how the semiconductor sector is faring amid high expectations from Wall Street.

Micron’s memory chip business has undergone a resurgence over the past year as Big Tech firms pour billions into the semiconductor sector for hardware to power artificial intelligence data centers.

Micron distinguishes itself by partnering with, rather than competing against, industry superpower Nvidia (NVDA). Micron supplies memory chips for Nvidia’s hotly demanded GPUs.

Wall Street expects Micron to record quarterly revenues 90% higher than last year — and that’s after analysts slightly lowered their expectations by 0.3% from a month ago. Here’s a breakdown of analysts’ forecasts, according to Bloomberg consensus estimates:

Revenue: $7.66 billion (Micron’s guidance: $7.4 billion to $7.8 billion) vs. $4.01 billion in Q4 2023
Adjusted earnings per share: $1.11 (Micron’s guidance: $1 to $1.16) vs. a loss of $1.07 in Q4 2023

Shares of the chipmaker rose as much as 2% in Wednesday trading.

Investors have staggeringly high and ever-increasing standards for AI chipmakers, leaving them often disappointed in recent months. Micron’s third quarter earnings beat did little to sway investors in late June.

Instead, shares plummeted due to its fourth quarter outlook, which came right in line with (rather than beating) Wall Street’s expectations. Nvidia stock also sank after reporting quarterly earnings at the end of August. Despite more than doubling profits and beating sales forecasts, investors wanted more from the semiconductor superpower. Nvidia has since rebounded, but Micron stock is down over 30% from three months ago.

FILE - A sign marks the entrance of the Micron Technology automotive chip manufacturing plant on Feb. 11, 2022, in Manassas, Va. On Tuesday, Oct. 4, chipmaker Micron announced an investment of up to $100 billion over the next 20-plus years to build a plant in upstate New York that could create 9,000 factory jobs. (AP Photo/Steve Helber, File) — The Micron Technology automotive chip manufacturing plant in Manassas, Va. (AP Photo/Steve Helber, File) (ASSOCIATED PRESS)

Nearly 93% of Wall Street analysts covering Micron recommend buying the stock. On average, they see its shares rising more than 50% over the next year to $143.94. Still, their opinions of Micron are mixed.

Morgan Stanley’s Joseph Moore thinks Wall Street’s softer expectations could help boost the stock post-earnings. “MU stock could rebound on earnings given a low bar near term, particularly if enthusiasm returns to AI beneficiaries,” he wrote in a note to investors earlier this week. But Moore maintained his Equal Weight rating of Micron and sees the stock as “fundamentally expensive.”

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

The PHLX Semiconductor Sector Index (^SOX) has begun to recover from a dip at the beginning of the month as tech stocks rallied following the US Federal Reserve’s jumbo interest rate cut and the Chinese central bank’s broad stimulus package. The index is up nearly 6% over the last week. Micron has been part of that trend, rising almost 10% over that time frame.

The company is also set to benefit from a bill awaiting signature from President Joe Biden that would loosen environmental requirements for microchip projects funded by the CHIPS and Science Act. Micron is one of the biggest beneficiaries of CHIPS Act funding, and the Building Chips in America Act passed by the US House of Representatives Monday would allow the company faster access to more than $6 billion in federal subsidies for its microchip plants planned for Idaho and New York.