Powered by demand for its memory chips from the quickly expanding artificial intelligence sector and an alleviating supply glut in its conventional PC and smartphone industries, Micron Technology outperformed expectations for third-quarter results on Wednesday.

After the bell, shares of the corporation increased by more than 2%. They have profited 34% this year on predictions that demand for the company’s memory chips in servers that support generative AI services will soar as a result of the success of OpenAI’s chatbot ChatGPT.

“The recent acceleration in the adoption of generative AI is driving higher-than-expected industry demand for memory and storage for AI servers, while traditional server demand for mainstream data center applications continues to be lackluster,” CEO Sanjay Mehrotra said.

Customers keep reducing surplus inventory, which has improved pricing patterns and raised expectations that the industry’s growth and revenue bottom has been reached, he continued.

Consumer spending on smartphones and personal computers hit a low point following a spike in demand during the epidemic, which lowered costs and increased inventory.

“We believe the current memory industry inventory correction is now behind us,” said Summit Insights Group managing director Kinngai Chan.

Chan said that despite expectations for a mixed second half of the year in terms of demand for servers, PCs, and cellphones, industry checks show some signs of stabilising demand.

According to Refinitiv statistics, Micron’s third-quarter revenue of $3.75 billion exceeded expectations of $3.65 billion, and its fourth-quarter revenue prediction of roughly $3.9 billion plus or minus $200 million was largely in line with projections.

Estimates called for a loss of $1.58 per share, but the company’s adjusted net loss of $1.43 per share was less than that.

The Biden administration is allegedly mulling updated restrictions meant to block the supply of artificial intelligence chips to China, which has chipmakers caught up in the U.S.-China technological dispute.

In a security review conducted last month, China’s cyberspace authority gave Micron’s devices a failing grade and forbade key infrastructure operators from purchasing them.

The largest memory chip manufacturer in the United States, Micron, reiterated on Wednesday that Chinese government personnel had contacted a number of its clients regarding potential uses for the company’s goods.

According to the firm, the CAC decision might jeopardise up to half of its market share in China.

“Our goal is to gain share in other parts of the market and retain our global share and this is not an instantaneous process, it takes time to play out,” Chief Business Officer Sumit Sadana said.

(Adapted from SCMP.com)