The chipmaker’s in-house AI has generated millions of dollars in additional yield.

Micron Technology, Inc. (NASDAQ: MU), a manufacturer of memory chips, uses an AI tool to earn millions of dollars of extra income on its treasury operations that deploy the company’s surplus cash in deposits and investments. (WSJ)

Micron held as much as $7.8 billion in cash and equivalents during the quarter ended June 3, 2021. Its interest earnings during the quarter, including from cash deposits, was $8 million.

The challenges from low yields

Given the low-interest rate regime, the company considered it worthwhile to invest in the development of an AI tool to optimize the hitherto manual investment process. The company deals with as many as 20 banks globally and has parameters that determine the maximum amounts that can be deployed with any institution, or in a particular asset.

The AI algorithm now pinpoints those asset classes or institutions that would earn the highest yield, and does this extremely quickly, considering the complicated matrix of internal guidelines.

Investment options include overnight bank deposits, time deposits, money-market funds, currencies, and investment managers.

“In this low-rate environment, given the amount of cash that we maintain, every basis point counts and translates to millions of dollars,” Greg Routin, Micron’s treasurer, told the WSJ.

The AI tool

David Zinsner, Micron’s CFO, took care to point out the AI tool was not intended to replace jobs, instead, it freed up the team to work in more valuable areas for the company.

The company’s experience with the tool, which launched in the second quarter, has been profitable. It has generated incremental yield income in the low millions of dollars, Micron revealed to the WSJ and has been instrumental in shifting the focus to higher-yielding bank deposits and away from low-yield money-market funds.

According to Routin, “this AI tool has really allowed us to take our optimization to the next level.”

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