S&P Upgrades Micron Rating on Strong AI Demand

S&P Boosts Micron's Rating Amid AI Boom

S&P Global Ratings has upgraded Micron Technology Inc. (NASDAQ:MU) to BBB from BBB-, assigning a positive outlook. The decision is based on accelerated growth and increased operational scale, primarily driven by surging demand for artificial intelligence products, which has significantly improved Micron's EBITDA and cash flow projections.

Overview of the Financial Upgrade

The ratings agency noted that strong demand for AI components like High Bandwidth Memory (HBM) is fueling Micron's financial strength. HBM revenue is estimated to be about 15% of total revenue in fiscal 2025. The company's robust performance is further evidenced by its Q1 revenue of $13.6 billion, a 57% year-over-year increase, and guidance for continued strong sequential growth.

Market and Economic Implications

Micron's financial health is solid, with its S&P-adjusted net leverage at approximately 0x, well below the upgrade threshold of 1x. S&P anticipates the company will build over $10 billion in cash reserves in fiscal 2026, supported by restrictions on share buybacks from the U.S. CHIPS Act. This position strengthens the company's ability to manage capital expenditures, which are expected to become a smaller portion of cash flow.

Future Outlook

The positive outlook reflects confidence in Micron's sustained growth, with its HBM supply for the calendar year 2026 already completely sold out. The agency expects a favorable supply-and-demand balance to persist, supported by constrained industry capacity and continued AI-driven demand benefiting both DRAM and NAND markets.

FAQ

Q: What is Micron's new credit rating from S&P?
A: S&P Global Ratings raised Micron's credit rating to BBB from BBB- with a positive outlook.

Q: What is the main driver behind the rating upgrade?
A: The primary driver is the significantly increased demand for its AI-related memory products, leading to faster revenue growth, higher EBITDA, and improved cash flow.

Source: Investing.com