Micron: I Finally Get It - The Market Still Underestimates The AI Memory Supercycle (Archive, Full Access)
AI memory market is heading toward worsening shortages and the market is being too conservative in its estimate of length of the upcycle.
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Elevator Pitch
- Micron Technology, Inc. faces a worsening DRAM and NAND capacity crunch, with sufficiency ratios turning more negative and supporting sharp price increases and revenue growth in both segments.
- Multi-year strategic customer agreements with prepayments reduce net working capital needs and drive structurally higher operating cash flow margins for Micron.
- Gross margins are guided to climb to 81% in the May 2026 quarter, with further upside as memory shortages intensify into the second half of this year.
- MU stock’s rally is driven mainly by surging EBITDA expectations rather than multiple expansion, suggesting a fundamentally driven, earnings-led upcycle rather than a hype-driven move.
- MU valuation embeds an implied 10-year EBITDA CAGR near 26%, which looks demanding unless the current AI-driven memory supercycle extends well beyond the consensus 2027 peak. And industry research suggests that is likely.
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