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The ripples triggered by the AI chip giant SpaceX‘s first earnings report since its IPO are spreading to the memory chip sector. Although SpaceX’s earnings themselves faced after-hours selling due to surging capital expenditures, CEO Elon Musk’s comment that “memory demand is growing 200% per year” sent a different signal to investors in Micron Technology (MU). On August 4, Micron’s stock closed up 7.62% at $892.67, as the market re-evaluates the valuation logic of this memory leader.
“Demand Up 200%, Supply Up Only 20%”: Musk Ignites Price Expectations
During SpaceX’s Q2 earnings call, Musk stated bluntly that the biggest bottleneck in current AI compute expansion lies in memory chips. He presented a striking set of figures: memory production capacity grows only about 20% annually, but AI-driven demand could grow at 200% or even higher. “The laws of economics tell us that when demand far exceeds supply, prices should rise, not fall,” he said.
These remarks were not merely emotional rhetoric. SpaceX’s Q2 capital expenditures surged to $18.4 billion, with AI-related spending accounting for approximately $15.8 billion, and the company expects capital spending to remain at comparable levels in Q3 and Q4. This implies that as a core “building material” for AI infrastructure, the demand curve for memory chips is becoming significantly steeper.
The Contradiction Between “Blowout” Earnings and “Attractive” Valuation
Micron’s just-released Q3 earnings (for the period ended May 28) fully illustrate the extent of this boom: revenue of $41.46 billion, up 345.7% year-over-year; diluted EPS of $24.67, compared to just $1.68 in the same period last year; and gross margins of 84.6%. Management also explicitly stated that the supply-demand tightness for DRAM and NAND will persist beyond 2027.
However, there is a notable divergence between earnings performance and stock price movement. After hitting an all-time high of $1,255 in June, Micron’s stock experienced a significant pullback and currently remains nearly 30% below its peak. Yet it is precisely this correction that makes valuation metrics appear unusually “cheap”: the forward P/E ratio stands at only about 5x, near its one-year low, and the market cap has retreated from its peak of $1.1 trillion to approximately $930 billion. Such a low forward P/E suggests that the market views the current exceptionally high profitability as an unsustainable “cyclical peak.”
Cyclical Destiny or Structural Inflection Point?
Market skepticism is not without basis. The semiconductor industry is highly cyclical, with capacity expansions often followed by oversupply and price collapses. Micron itself is investing over $250 billion in new U.S. factory construction, and the question of whether new capacity will repeat past mistakes is a major concern for investors. Additionally, the IPO of Chinese memory maker CXMT has also raised concerns about future price competition.
However, the current cycle differs fundamentally from the past. Historically, memory demand was driven by consumer electronics such as smartphones and PCs, whereas the current core driver is AI infrastructure buildout. As Musk emphasized, the stark gap between demand growth and supply growth suggests that the window for price increases may last longer than in traditional cycles. At the same time, Micron’s profitability has undergone a qualitative change, with Q3 cloud business revenue reaching $13.77 billion and data center segment gross margins hitting 87%.
Conclusion
Micron’s current dilemma lies in this contradiction: the extremely low valuation implies a pessimistic “cycle peak” expectation, while Musk’s latest remarks and SpaceX’s capex plans reinforce the logic that “demand still has room to run.” For investors, the key question is whether this represents just another “summit” in the cyclical rollercoaster, or the beginning of a valuation reshaping in the AI era.
