Can AI-Driven DRAM Demand Sustain Micron's Revenue Upswing?

Core Insights - Micron Technology, Inc. (MU) has experienced a significant revenue increase primarily due to heightened DRAM demand associated with artificial intelligence (AI) workloads, with DRAM revenues rising 69% year-over-year to $10.8 billion in Q1 fiscal 2026, representing 79% of total revenues [1][11] Group 1: DRAM Demand and Pricing - The demand for DRAM is being driven by the growing complexity of AI models, which require more memory than traditional servers, particularly for training and inference tasks [2] - The average selling prices of DRAM have surged nearly 20% in the first quarter, while DRAM bit shipments saw a slight sequential increase [1][2] - Tight supply in the DRAM market, due to limited industry capacity additions, is enhancing Micron's pricing power, supported by broader demand from AI personal computers, smartphones, and automobiles [4][11] Group 2: HBM Business Growth - Micron's high-bandwidth memory (HBM) business is progressing rapidly, with preparations for a transition to HBM4, showcasing industry-leading bandwidth and power efficiency [3] - The company has secured pricing agreements for most of its 2026 HBM3E supply, indicating strong revenue growth visibility [3] Group 3: Revenue Projections - Analysts project that Micron's fiscal 2026 DRAM revenues will reach $59.76 billion, reflecting a year-over-year increase of 109% [5] - The Zacks Consensus Estimate for Micron's earnings implies a year-over-year increase of 278.3% for fiscal 2026 and 26.2% for fiscal 2027, with upward revisions in estimates over the past 30 days [16] Group 4: Competitive Landscape - While there are no direct U.S. stock exchange-listed competitors in the memory chip space, Intel and Broadcom are significant players in the HBM supply chain and AI hardware ecosystem [6] - Intel is enhancing its AI memory chip portfolio by integrating HBM into its high-performance accelerators, while Broadcom is developing custom AI accelerators and networking solutions for major tech companies [7][8] Group 5: Stock Performance and Valuation - Micron's shares have surged approximately 229% over the past year, outperforming the Zacks Computer – Integrated Systems industry's gain of 89% [9] - The company trades at a forward price-to-earnings ratio of 9.53, significantly lower than the industry average of 17.77 [13]