Graphics processing units (GPUs) are the most important chips in data centers for processing artificial intelligence (AI) workloads. This is why investors have turned to providers like Nvidia And Advanced microdevices over the last few years. However, GPUs require an increasing amount of high-bandwidth memory (HBM) to keep data flowing smoothly. Without it, bottlenecks would limit the performance of chatbots and AI agents.
Micronic technology (UM -2.05%) is a leading global memory provider and is experiencing significant AI-related demand across multiple categories, including data center. As a result, its revenues and profits are growing at an explosive rate, fueling a whopping 500% gain in its shares over the past 12 months (as of market close on Thursday, October 1).
Can the recovery continue, or have investors already priced in most of the company’s future growth?
Image source: The Motley Fool.
Micron just released a blockbuster set of fiscal 2026 results
Micron closed its 2026 fiscal year on September 3. The company generated a record total revenue of $133.1 billion, a staggering 256% increase from the previous year. This growth rate accelerated significantly starting in fiscal 2025, when revenue grew 49%.
AI-related demand for memory has fueled this incredible result, and it’s not just coming from the data center industry. Below are Micron’s four business units, their fiscal 2026 revenues and growth rates.
Segment | Revenue for the 2026 financial year | Growth (year over year) |
|---|---|---|
Cloud memory | $43.1 billion | 219% |
Core Data Center | $37.6 billion | 420% |
Mobile and client | $36.6 billion | 209% |
Automotive and Embedded | $15.9 billion | 234% |
Data source: Micron Technology.
The cloud memory segment is where Micron accounts for memory sales to hyperscale customers (including companies like Amazon and Microsoft), as well as sales from HBM to all data center customers. The core data center business includes the sale of non-HBM storage and memory solutions to data center operators.
The Mobile and Client segment includes memory sales to smartphone and personal computer manufacturers. This is an increasingly important category as AI models quickly become more efficient, so many devices can now process them locally rather than relying on external data centers.
Finally, it is in the automotive and embedded sector that Micron represents memory sales to automobile and robot manufacturers. The company says vehicles with Level 4 autonomous capabilities (fully self-driving) require more than double the memory and storage capacity than vehicles with older Level 2 and Level 3 technologies. Additionally, humanoid robots are expected to use as much memory as Level 4 autonomous vehicles, so these two emerging industries offer Micron a huge opportunity.
In a series of prepared remarks to shareholders released Sept. 30, Micron Chief Executive Sanjay Mehrotra said memory supply could be even tighter in fiscal 2027 and 2028 compared to fiscal 2026, suggesting the company’s revenue is expected to continue growing at a rapid pace.
Micron stock is technically cheap, but there’s a problem
The current global memory shortage gives suppliers the ability to dictate their prices, thereby significantly increasing their profit margins. As a result, Micron’s earnings exploded 879% to $74.33 per share in fiscal 2026. This puts its stock at a price-to-earnings (P/E) ratio of just 14.7, making it cheaper than S&P500 and the Nasdaq-100 indices that trade at P/E ratios of 23.5 and 35.2, respectively.
Wall Street’s average estimate (provided by Yahoo! Finance) suggests that Micron could grow earnings to $176.69 per share in fiscal 2027, putting its stock at a forward P/E of just 6.2. But why is a company that is growing at the rate of Micron trading at such a discount to the market as a whole? Simply put, the semiconductor industry has always been very cyclical, so investors know that the recent bonanza likely won’t last forever.
Today’s change
(-2.05%) $-10:50 p.m.
Current price
$1,074.89
Key Data Points
Daily scope
$1072.01 -$1108.00
52 week range
$179.61 -$1255.00
Volume
27.3 million
Average flight
33.8 million
Gross margin
85.86%
Dividend yield
0.05%
Micron and its competitors are working to build manufacturing capacity, which will ultimately ease supply constraints and put downward pressure on prices. Micron won’t be able to maintain its current level of profits when the time comes, so its shares could be more expensive than they currently appear at face value. Additionally, the rising cost of chips and components could have a significant impact on demand in the near future.
Last Tuesday, ChatGPT creator OpenAI launched a new $500 per month subscription plan to suit its biggest users. At the same time, he halved the number of tokens available through its $200 per month subscription, which was formerly its main plan. Essentially, the company increased the price of its most expensive offering by 150% overnight, and rising infrastructure costs are almost certainly the reason.
A few months ago, an investigation carried out by UBS Group found that 60% of companies were already redirecting some AI tasks to cheaper, more efficient models in an effort to reduce costs. These models use less computing power, so if this trend continues, Micron and all other semiconductor companies could experience a gradual decline in demand.
With all of this in mind, I personally will not buy Micron stock at the current price. I don’t predict it will suffer a big decline in the short term, but it is very difficult to determine its fair value given the potential change in supply and demand dynamics over the next couple of years.
Gn bussni
