By Arsheeya Bajwa

(Reuters) - Micron Technology ( MU ) surged 15% on Thursday in premarket trading, leading a rally in chip stocks after its strong revenue forecast signaled robust demand for semiconductors used to power generative AI technology.

The company, whose high-bandwidth memory chips (HBM) are used in Nvidia's ( NVDA ) popular artificial intelligence processors, was set to add more than $17.5 billion to its market value.

Strong demand for HBM chips has helped Micron offset inventory buildups in other areas such as the personal computer market.

The company delivered its best quarterly revenue growth in a decade in the fourth quarter ended Aug. 29 and its forecast for the current period was widely above Wall Street estimates.

The earnings also lifted shares of Nvidia ( NVDA ) and Broadcom ( AVGO ) by more than 1.5%. Other chip firms, including AMD and Intel ( INTC ), were up close to 2.5%.

"The firm (Micron) benefits from a broad and strong up-cycle in memory chip demand, aided by AI-related demand," Morningstar analysts said in a note.

Strong pricing for HBM chips is expected to help Micron's gross margins, which were earlier pressured by an expensive ramp-up of its HBM manufacturing capacity.

The company said it expects adjusted gross margin of about 39.5% for the first quarter ending November, compared to estimates of 37.7%.

It recorded an adjusted gross margin of 36.5% in the fourth quarter, a big jump from a negative 9.1% in the year-ago period.

Strong gross margins from the company's HBM products helped drive overall margins higher, CEO Sanjay Mehrotra said on a post-earnings call on Wednesday.

The bar for Micron was relatively lower this earnings cycle, helping it outperform, Morgan Stanley analysts said.

After Micron's last earnings report in June, nine of 26 analysts had lowered their estimates for the first-quarter revenue, per LSEG, amid fears that HBM pricing was weakening.

Micron largely allayed those concerns, with Chief Financial Officer Matt Murphy attributing improved profitability in the fourth quarter to higher pricing.