Few stocks have outperformed Micron Technology (MU) since last year. As a leader in memory chip manufacturing, the company’s stock price has surged over 300%, primarily driven by a shortage of memory chips fueled by the AI boom. Strong demand for high-bandwidth memory chips, which work in tandem with GPUs to power AI applications, has created a supply-demand dynamic propelling both Micron’s revenue and profits to soar.
For Micron’s fiscal year 2026 ending in August 2026, analysts project its revenue will double to $75.4 billion, with adjusted earnings per share quadrupling to $33.38. This translates to a forward price-to-earnings ratio of just 12.
The memory industry is currently experiencing a “super cycle.” The boom in the memory segment has also driven significant gains in other memory-related stocks like SK Hynix, Samsung, and SanDisk. Memory chip prices are highly sensitive to fluctuations in supply, demand, and inventory, exhibiting severe cyclicality. Due to the immense capital investment required in the semiconductor industry, manufacturers tend to operate at full capacity as long as gross margins remain positive, even if net profits may suffer due to fixed costs.
Looking at its trajectory over the past decade, Micron has weathered multiple industry cycles. During the post-pandemic industry downturn, its net losses over the trailing twelve months once approached $8 billion.
However, Micron now appears poised for a record-breaking profit phase. Analysts estimate the company’s net income will reach approximately $35 billion in the current fiscal year, with profit growth expected to continue at least through 2027.
Historical data shows that Micron’s past memory cycles have been relatively short, with transitions from trough to peak or peak to trough often taking just a few years. The near-$16 billion net profit peak visible in the chart represents Micron’s highest historical earnings record to date. In that cycle, driven by factors like cloud computing, Micron’s P/E ratio fell to around 3 when profits peaked, as the stock price had already topped out earlier.
Because stock prices are forward-looking, Micron’s stock price cycles have typically led its earnings cycles. In periods before Micron’s stock broke above the chart’s upper bounds a year ago, its stock price turning points usually preceded shifts in profit trends. Over the past two decades, Micron’s stock price has averaged a gain of about 600% from trough to peak within a cycle. Its current rally has already surpassed that typical increase.
Although memory cycles follow historical patterns, the current boom features some unique elements. Hyperscalers, including Amazon, Microsoft, Alphabet, and Meta, plan to spend over $600 billion in capital expenditures, a significant portion earmarked for AI infrastructure. This suggests sustained strong demand for memory. Supply-side dynamics are also favorable: analysts forecast memory prices will continue rising this year, and new capacity takes time to come online, making it difficult to quickly alleviate shortages. For the foreseeable future, the race in AI is expected to continue driving demand growth.
Several tech giants, including Apple and Alphabet, have mentioned chip shortages, anticipating a significant impact on the smartphone industry this year.
The memory cycle will eventually peak and decline as it has in the past, but that may still be years away. In the meantime, investing in Micron seems a prudent way to capture the AI boom, with its profits projected to grow at a high rate for at least the next year. If market enthusiasm for AI persists, the stock price could potentially double again before peaking, approaching $800 per share.
However, investors should also be mindful of the memory industry’s cyclical history. Given the recent sharp rally and gains exceeding 300% in a year, the eventual downturn could be severe when the cycle ultimately turns.
