Published - March 30, 2023 @ 11:45 AM (EET)

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After company executives suggested that the market may be reaching a bottom in conjunction with reporting its fiscal second-quarter results, shares of Micron Technology Inc. (NASDAQ:MU) gained more than 7% on Wednesday.

While Micron, specializing in DRM and NAND flash-memory chips, is still struggling with headwinds in the semiconductor industry, Wall Street analysts acknowledged a recovery is approaching.

WHAT HAPPENED

In a statement this week, the company issued a better-than-expected outlook for the third quarter and said that sales would be as much as $3.75 billion as they work through a pileup of excess inventory instead of buying new chips.

"Customer inventories are getting better, and we expect gradual improvements to the industry's supply-demand balance," said Chief Executive Officer Sanjay Mehrotra.

Meanwhile, Micron wrote down $1.43 billion worth of inventory, resulting in a negative impact of $1.34 per diluted share, a scenario that has long plagued the memory industry following boom years.

For the quarter, Micron reported a $2.31 billion loss. While the picture is expected to improve in the second half of the year, the company said profitability would remain challenging, thus reducing staff by about 15%, up from a previous plan to cut heads by 10% as part of its cost-reduction program.

Revenue of $3.69 billion was down 53% from a year ago and 10% from the fiscal first quarter. Still, despite the ugly results,  Mehrotra asserted in his comments that Micron believes the company's addressable market will hit a record in calendar 2025, striking an upbeat tone in its press release. 

WHY IT MATTERS

Micron and other growth stocks, which tend to benefit most from a brighter economic outlook due to investors' hopes for far-out profit, helped boost the Nasdaq and S&P500 on Wednesday and led gains in the PHLX semiconductor index, which closed 3.3% higher.

Investors are also trying to gauge whether the turmoil in the banking sector is subsiding and renewed hopes for the Federal Reserve to stop tightening financial conditions.

Micron's stock has gained 19% this year, closing Tuesday's regular trading session at $59.28, virtually lifting all chip stocks on its fiscal second-quarter report on Wednesday.

Intel (NASDAQ:INTC), Qualcomm (NASDAQ:QCOM), and Taiwan Semiconductor Manufacturing (NYSE:TSM) rose 7.6%, 3.1%, and 2.1%, respectively.