Key Points
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Micron is expected to generate more revenue in the upcoming quarter than it generated three years ago for the entire year.
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The stock seems reasonably valued, and it could perform well if memory demand continues to exceed supply.
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Less than a year ago, shares of Micron Technology (NASDAQ: MU) traded below $100. At the time, Micron stock traded at about 15 times earnings, which was quite reasonable. But the cheap valuation wasn’t enough to entice investors.
Micron sells computer memory products, which are prone to extreme boom-and-bust cycles. When demand is strong, profits are good. But a slight miscalculation by one of the three major players often leads to oversupply, quickly dropping profits.
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Investors were avoiding Micron stock because they feared a potential downturn in the business. However, Micron is enjoying unprecedented demand for its products. The stock price is finally rocketing higher, gaining over 300% in just the last 12 months. And now investors want to know whether it’s too late to buy.
The historic business boom
Micron makes both NAND and DRAM memory products. But its high-bandwidth products (a type of DRAM) are particularly in high demand. The company has already sold its entire 2026 supply, and it’s in conversations for 2027.
Artificial intelligence (AI) needs memory to work, and the faster the memory is, the better. This is why the high-bandwidth memory space is expected to grow from a $35 billion market in 2025 to a $100 billion market by 2028. And Micron is positioned as a top contender for a large portion of this spending.
Here’s how fast Micron is growing: In its fiscal first quarter of 2026, its revenue was up 57% year over year. For the upcoming second quarter, the company expects to generate revenue of $18.7 billion. This would be a 130% increase and more than what it generated during its entire fiscal 2023.
Soaring sales are leading to record profitability. In the first half of fiscal 2026, Micron expects to report earnings per share (EPS) of about $13. Assuming similar profitability in the second half of the year, Micron stock trades at about 15 times this year’s profits, which is incredible given its 300% gain.
So what now?
I’m inclined to believe that Micron’s strong sales and profits will continue for multiple years, differing from past cycles. Here’s why: Micron and its competitors have essentially sold out their supply. They are building new facilities to increase supply, but these won’t start coming online until 2027.
Even when supply finally increases, Micron could continue to achieve record profitability, assuming demand remains strong. To reiterate, the AI infrastructure build-out is what’s driving demand. And spending from the hyperscalers is expected to continue, which alone can sustain demand.
This really makes all the difference with Micron stock today. If AI infrastructure demand continues to outpace supply through the end of the decade, then Micron stock could still be a good buy today. However, if AI infrastructure unexpectedly pulls back, then Micron could quickly be left with too much capacity, reversing its windfall.
Investors need to decide what they believe will happen with AI infrastructure spending when building an investment thesis for Micron stock. But for what it’s worth, I believe it’s likely to outperform the S&P 500 over the next five years.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
