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Fueled by robust demand for its high-bandwidth memory (HBM) chips, which are a key building block for AI data centers, and higher prices for both DRAM and NAND memory chips, Micron (MU) easily topped Q3 EPS and revenue estimates. However, the company has become a victim of its own success as its strong results and upside Q4 guidance failed to live up to investors' sky-high expectations.

• The main source of disappointment is stemming from its Q4 revenue forecast of $7.40-$7.80 bln. While the midpoint of this guidance equates to impressive yr/yr growth of 90% -- MU's highest growth rate in many years -- it also was only barely above analysts' estimates. Rewinding to MU's Q2 earnings report in late March, the company issued Q3 EPS and revenue guidance that blew past forecasts, showing that NVIDIA (NVDA) isn't the only AI game in town.
• With that said, MU's less spectacular performance relative to NVDA -- which crushed Q1 estimates and provided blowout Q2 guidance on May 22 -- offers a reality check that it's not quite in the same league as NVDA in terms of AI. MU still generates most of its revenue from the PC and smartphone end markets, which the company expects to grow by just low-single digits and low-to-mid-single digits in 2024.
• Still, AI is poised to become a significantly larger piece of the pie for MU. With the looming emergence of AI smartphones and PCs, MU is well-positioned to capitalize, especially given that new AI smartphones will utilize about 50% more DRAM content compared to non-AI phones.
• Meanwhile, data center revenue jumped by more than 50% in Q3 to a record high, thanks to the strong demand for HBM. Supply constraints have been the only limiting factor for MU's HBM3E chipset. After launching and ramping production in Q2, MU quickly sold out for the remainder of CY24 and for 2025. 
• To meet the insatiable demand for HBM, the company is planning to ramp up spending. More specifically, MU's capex estimate for FY24 is approximately $8 bln and CEO Sanjay Mehrotra commented during the earnings call that MU will ramp up capex materially in FY25. That disclosure may also be weighing on the stock.

The main takeaway is that business is booming for MU as the AI-fueled catalysts gain steam, although that's not being reflected in today's stock action. With the stock up by nearly 70% on a year-to-date basis (prior to today), and with shares trading with a lofty forward P/E of about 20x, there was little room for error and MU's guidance provided the excuse to lock in gains.