The Biggest Gains for This AI Stock’s Business May Be Yet to Come

Artificial intelligence encourages companies to invest heavily in capital. Much of that money is expected to flow to companies that produce hardware components critical to running AI-based applications and mining the data needed to produce the most valuable insights. For companies specializing in the production of these components, each news story touting a new multibillion-dollar investment in AI is reason to rejoice.

Micron technology (UM 2.77%) has placed itself in exactly this position as a critical supplier of memory chips to AI hardwareand yesterday, the first article in this series on Micron for the Traveler Wallet looked at the company’s inspiring story and rose to the top of the technology industry. Today you’ll learn about Micron’s financial results and why the best of times may still be far in the future.

Image source: Getty Images.

2 Perspectives on Micron’s Rise

One thing investors can learn a lot from with Micron’s financial results is that when you start a comparison, it makes a huge difference. The following two stories are completely true, but they paint a very different picture of Micron’s growth:

• Over the past 12 months, Micron’s revenue has nearly tripled compared to the company’s 2023 fiscal year. THE semiconductor The memory chip maker went from a huge loss of $5.8 billion three years ago to a net profit of $11.9 billion over the past four quarters. Margins have seen explosive growth.
• Micron’s sales are up just under 40% since the chipmaker’s strong year in fiscal 2022. Operating margins and profit margins have only recently returned to the same levels from four years ago, and the 37% rise in net income, while solid, seems disproportionate to the stock’s much larger gains over the same period.

The way to reconcile these two views is to understand that historically, Micron’s memory chip business has followed the ups and downs of the technology business cycle. At times, Micron’s chips are in high demand, and the high prices it is able to command for the chips it is able to produce leads Micron to invest to increase its capacity. Inevitably, this increase in demand was followed by a slowdown in Micron’s component market. At this point – as we saw during the 2022 calendar year bear market – sales may take a major hit. So it’s crucial to make sure that when comparing Micron’s recent results with older numbers, you’re measuring from peak to peak or trough to trough. At the very least, avoiding erroneous comparisons avoids embarrassing miscalculations about what the future is likely to bring.

Today’s change

(-2.77%) $-10.93

Current price

$383.76

Key Data Points

Market capitalization

$432 billion

Daily scope

$370.72 -$391.78

52 week range

$61.54 -$455.50

Volume

1.3 million

Average flight

32M

Gross margin

45.53%

Dividend yield

0.12%

The supply crisis is here

What might be different now, however, is how long Micron can remain on a cyclical recovery. In its latest quarterly conference call, Micron said it has already reached agreements with fixed price and volume terms for all of its high-speed memory supply for calendar year 2026. CEO Sanjay Mehrotra now expects the size of the total addressable memory market to nearly triple, from $35 billion in 2025 to $100 billion in 2028. Micron had initially thought it would be a wait 2030 for the memory market to grow this much, and it is poised to eclipse what had been the size of the entire dynamic RAM market as recently as 2024.

If Micron can take advantage of the strong supply-demand dynamics and begin to assert its pricing power more effectively, then the financial growth we’ve seen so far from the chipmaker could be just the tip of the iceberg. The third and final article of this Traveler Wallet The series on Micron will take a closer look at the technology pioneer’s strategic growth plans and determine whether they justify the sharp rise in memory chip stock prices.