Shares of Micron Technology (MU +0.35%) are up 182% year to date (as of Nov. 5). The company's memory chips, which are used in phones and computers, are an essential piece of the supply chain for artificial intelligence (AI) data centers.
While Micron operates in a historically cyclical industry, the long-term trend in serving the high-performance computing market could support more gains for investors, even from these highs.
Image source: Micron Technology.
Micron is benefiting from the massive data center buildout
Micron's business has been prone to volatile swings in selling prices for memory and storage chips where it is one of the leading suppliers of dynamic random access memory (DRAM) and solid-state storage drives (SSD). Financial results have previously been lumpy, but the long-term demand for more data bandwidth in data centers could lead to more sustainable growth.
There is a massive buildout underway to expand data-center capacity for AI. Big tech companies continue to see demand for their AI cloud services that is far greater than the compute capacity they currently have available from existing data centers. This is why leading cloud providers like Microsoft and Google continue to announce higher capital spending going toward expanding their infrastructure, which is good news for Micron.
During the company's most recent earnings call, CEO Sanjay Mehrotra eased investor concerns about the possibility of another cyclical downturn for Micron's business:
AI-driven demand is accelerating, and industry DRAM supply is tight. Our [high-memory bandwidth] performance has been strong, and robust demand, tight DRAM supply, and disciplined execution have significantly strengthened the profitability of the rest of our DRAM portfolio.
NASDAQ: MU
Key Data Points
Mehrotra is signaling that growing AI demand could sustain above-average growth at Micron for longer than Wall Street analysts originally thought. Revenue grew 49% year over year in fiscal 2025 (which ended in August), reaching a record $37 billion.
The shortage in memory supply is also boosting Micron's margins and earnings performance. Adjusted earnings per share jumped 538% year over year in fiscal 2025 to reach $8.29. The better-than-expected earnings growth is causing analysts to revise their long-term growth estimates higher, providing extra fuel for the stock.
Even after the sharp rally this year, investors can still justify buying shares at these highs. The stock is trading at a forward price-to-earnings multiple of about 14 based on fiscal 2026 estimates. This is while analysts are now projecting Micron's earnings to grow at an annualized rate of 65% over the next few years.
