Micron Technology (MU 4.14%) is one of the world's leading producers of DRAM and NAND memory chips. It went through several boom-and-bust cycles in its 40-year history as a public company, but it still turned a $1,000 investment in its initial public offering into nearly $57,000.
Micron now has a market cap of $88 billion. It's still smaller than Intel and Advanced Micro Devices, which are worth $184 billion and $281 billion, respectively; and Nvidia, which recently saw its market cap hit $1.8 trillion.
But could Micron surprise investors and become the next trillion-dollar chipmaker by the end of this decade? Let's review its business model, growth rates, and valuations to decide.
Image source: Micron Technology.
Another growth cycle is beginning
Micron is the world's third-largest supplier of DRAM chips and the fifth-largest supplier of NAND chips. South Korea's Samsung leads both markets, but its DRAM and NAND chips still trail slightly behind Micron's in terms of transistor density and power efficiency. In its latest quarter, Micron generated 73% of its revenue from DRAM chips, 26% from NAND chips, and the remaining sliver from other types of memory chips.
Over the past two years, Micron's sales of DRAM and NAND chips declined as it grappled with declining PC shipments in a post-pandemic market, the end of the 5G upgrade cycle, and macro headwinds for the industrial market. The Chinese government also barred the country's key infrastructure providers from buying Micron's chips as its tech war with the U.S. and Europe escalated. Those headwinds offset the stronger growth of its artificial intelligence (AI) and automotive markets.
NASDAQ: MU
Key Data Points
Micron's revenue rose 29% in fiscal 2021 (which ended in September 2020), but it grew just 11% in fiscal 2022 and plunged 49% in fiscal 2023. However, analysts expect 46% revenue growth in fiscal 2024 as the macro environment warms up, the PC and smartphone markets stabilize, the industrial and auto markets expand, and the explosive growth of the generative AI market drives more data centers to upgrade their memory chips alongside Nvidia's GPUs.
But how much would Micron be worth in 2030?
Analysts expect Micron's revenue to grow another 40% in fiscal 2025, but rise just 9% to $34.5 billion in fiscal 2026 as the growth cycle cools down. That would represent a compound annual growth rate (CAGR) of just 2.9% from fiscal 2022.
These volatile cycles make it difficult to gauge Micron's long-term growth potential, but we know its revenue grew at a steady CAGR of 5.5% from fiscal 2013 to fiscal 2023 through two major cyclical downturns. Looking ahead, Industry Research Biz expects the global DRAM and NAND markets to expand at a combined CAGR of 5.9% from 2023 to 2029.
Based on those estimates, we can conservatively assume that Micron will grow its revenue at a CAGR of 5% from fiscal 2026 to fiscal 2030 -- which would boost its annual revenue to about $42 billion by the final year. Micron is reasonably valued right now at about 4 times this year's sales -- so if its valuation holds steady, it could be worth $168 billion by 2030. That means its stock would nearly double from its current levels, but it could take a few more decades to join the four-comma club.
Look beyond Micron's market cap
Micron won't become a trillion-dollar chipmaker over the next six years, but I believe it's still a sound way to profit from the long-term expansion of the PC, mobile, AI, industrial, and automotive markets as they gobble up more memory chips. It still faces tough competition and is more prone to cyclical downturns than many other chipmakers, but investors who ride its stock through the next few boom-and-bust cycles could be well rewarded.
