Key Takeaways
- Micron Technology’s shares have risen by 170% year to date, driven by the growing demand for artificial intelligence (AI) hardware
- The company’s high-bandwidth memory devices, such as DRAM and NAND flash, play a crucial role in enabling AI technology
- Micron’s fiscal fourth-quarter revenue surged 49% year over year, driven by demand from data center clients
- The company’s gross margins have improved, and it is expected to continue to benefit from the AI-driven boom cycle
- Micron’s stock is still relatively cheap, with a forward price-to-earnings (P/E) multiple of 14
Introduction to Micron Technology
The generative artificial intelligence (AI) megatrend has allowed many older technology companies to rise from relative obscurity. One such company is Micron Technology, whose shares have risen by a whopping 170% year to date. Micron serves the pick-and-shovel side of AI, supplying hardware that other companies need to create consumer-facing software and services. The company’s high-bandwidth memory devices, such as DRAM and NAND flash, play a crucial role in enabling AI technology. With its shares still rising, it’s worth exploring whether Micron still has millionaire-maker potential.
Why is Micron Booming?
The AI hardware narrative tends to focus on graphics processing units (GPUs), which do the brunt of the work of running and training large language models (LLMs) like ChatGPT. However, there are other computer components that make the technology possible. Micron’s high-bandwidth memory devices are essential for storing and accessing the vast libraries of AI training data. The company’s products also provide powerful working memory, enabling algorithms to access data in real-time and answer users’ questions. As America’s largest computer memory specialist, it was only a matter of time before investor capital began flowing in. The stock’s growth isn’t just based on hype, as operational results are also showing significant progress.
Operational Progress
Micron’s fiscal fourth-quarter revenue surged 49% year over year to $37.38, driven by an explosion of demand from data center clients, which tend to focus on AI-related workloads. The company’s gross margins have also improved, rising from 35.3% to 44.7% year over year, as its product mix shifts toward higher-end memory products. This shift enables the company to command better pricing, and there is still potential for continued improvements. The sustained rise in gross margins is a positive sign, indicating that Micron is well-positioned to benefit from the growing demand for AI hardware.
Industry Trends
Historically, the computer memory industry has been highly cyclical, prone to boom-and-bust cycles. This trend occurs because the products are generally commoditized and poorly differentiated from each other, while having high fixed production costs and slow manufacturing lead times. When demand is high, producers invest in expanding their production capacity, leading to a glut when supply outstrips demand and pricing strategies become a race to the bottom. However, generative AI is already sparking a massive boom cycle for memory hardware that is likely to continue in 2026 and beyond. The ravenous demand for AI is leading to shortages across the computer memory industry, enabling Micron to command higher prices across its product line.
Future Prospects
Analysts at Wells Fargo believe that DRAM industry revenue could double in 2026, setting Micron up for a huge amount of profit that it can return to shareholders. With a forward price-to-earnings (P/E) multiple of just 14, Micron stock is still remarkably cheap, despite its legendary rally in 2025. While Micron probably won’t make you a millionaire, it looks poised for continued market-beating performance in 2026 and beyond. The company will likely return a large portion of its growing profits to shareholders through its buyback program, which it resumed last year. This strategy could help smooth out the inherent cyclicality of Micron’s business model by reducing the number of shares outstanding relative to future earnings.
Conclusion
In conclusion, Micron Technology’s shares have risen significantly, driven by the growing demand for AI hardware. The company’s high-bandwidth memory devices play a crucial role in enabling AI technology, and its operational results are showing significant progress. While the computer memory industry is cyclical, generative AI is sparking a massive boom cycle that is likely to continue in 2026 and beyond. With its relatively cheap stock and potential for continued growth, Micron is an attractive investment opportunity for those looking to benefit from the AI megatrend. However, it’s essential to remember that the company’s business model is inherently cyclical, and investors should be prepared for potential fluctuations in the market.
