(Reuters) -Micron Technology ( MU ) forecast first-quarter revenue above market estimates on Tuesday, betting on booming demand for artificial intelligence hardware to boost sales of its advanced memory chips as a race to dominate AI tech intensifies. 

Shares of the memory chip maker rose over 2% in extended trading. An optimistic outlook from Micron could help add fuel to Wall Street's AI-backed rally, which has doubled its share price so far this year. 

Efforts to build the most sophisticated AI models and expand the data center infrastructure that they run on has boosted demand for Micron's high-bandwidth memory chips, or HBM. 

Much of the competition among the world's largest memory suppliers - Micron, SK Hynix ( HXSCF ) and Samsung - has centered on becoming a key supplier to Nvidia ( NVDA ), owing to the world's most valuable company's dominant market position. Micron supplies HBM for some of Nvidia's ( NVDA ) semiconductors.

Micron forecast first-quarter sales of $12.50 billion, plus or minus $300 million, compared with the analysts' average estimate of $11.94 billion, according to data compiled by LSEG. 

HBM - a type of dynamic random access memory or DRAM - involves stacking chips vertically to reduce power consumption, helping process large volumes of data, making it invaluable in AI development.

In fiscal fourth quarter, Micron's HBM revenue grew to nearly $2 billion, implying an annualized run rate of nearly $8 billion, CEO Sanjay Mehrotra said in prepared remarks.

Micron said it is partnering with TSMC for manufacturing the base logic die for its latest "HBM4E" for both customized products and off-the-shelf iterations.

Latest developments in HBM technology have progressed to customer-specific constructions, making it difficult to switch between memory providers and upping the stakes for Micron as it tries to elbow SK Hynix ( HXSCF ) out of Nvidia ( NVDA ) designs.

Micron also forecast adjusted gross margin of 51.5%, far above estimates of 45.9%.

"The significantly higher gross margin outlook was the key criteria for investors," said Kinngai Chan, an analyst at Summit Insights. "Pricing is better than expected."

After months of inventory corrections, analysts have pointed to improved pricing across the spectrum of memory chips, from DRAM used in personal electronics to NAND employed in data storage devices. 

The company reported revenue of $11.32 billion for the fourth quarter, beating estimates of $11.22 billion. It recorded adjusted earnings of $3.03 per share in the fourth quarter, beating estimates.