How High Can Micron Go In the Memory Supercycle? Here's What History Says

Core Viewpoint - Micron Technology has significantly benefited from the AI boom, with its stock price increasing over 300% due to a generational shortage of memory chips driven by high demand for high-bandwidth memory (HBM) chips used in AI applications [1][2]. Financial Performance - Analysts project that Micron's revenue will double to $75.4 billion for fiscal 2026, with adjusted earnings per share expected to quadruple to $33.38, resulting in a forward P/E ratio of 12 [2]. - Micron is estimated to achieve a net income of approximately $35 billion for the current fiscal year, with profits expected to continue rising at least through 2027 [8]. Market Dynamics - The memory subsector is experiencing a supercycle, which has also positively impacted other memory companies like SK Hynix, Samsung, and Sandisk [4]. - Memory chips are subject to boom-and-bust cycles, with prices fluctuating based on demand and inventory levels, leading to intense capital costs in the semiconductor industry [5]. Historical Context - Micron has experienced multiple cycles over the past decade, with net losses reaching nearly $8 billion during the post-pandemic downturn [6]. - Historical memory cycles for Micron have been relatively short, with trough-to-peak or peak-to-trough periods lasting just a couple of years [9]. Stock Performance - Historically, Micron's stock has gained about 600% from trough to peak during its cycles over the last 20 years [13]. - The most recent cycle shows a significant gain of 840% so far, exceeding typical trough-to-peak gains [14]. Unique Current Conditions - The current memory boom is characterized by unprecedented capital expenditures from major tech companies, with over $600 billion planned for AI infrastructure, indicating sustained demand for memory [15]. - The ongoing shortage of memory chips is expected to impact the smartphone industry significantly, with new capacity taking time to come online [16]. Future Outlook - While the memory cycle will eventually peak, it may take years, and Micron is positioned as a strong investment opportunity in the AI boom, with potential for the stock to double before reaching its peak [17].