Micron Technology (MU +3.95%) probably isn't the first place you expect to see explosive gains in the tech industry. Until recently, shares in the 47-year-old computer memory and storage specialist have languished -- struggling to surpass the highs it hit during the dot-com bubble at the start of the century. However, things might finally be changing.
The emergence of generative artificial intelligence (AI) has increased demand for its high-capacity data storage solutions. The company has earned a flurry of analyst upgrades and raised its guidance as business momentum picks up. But with shares up by 186% since the start of the year, are the positive changes already priced in?
Let's dig deeper into the pros and cons of Micron to decide if it's still a millionaire-maker stock.
NASDAQ: MU
Key Data Points
Another pick-and-shovel play
Analysts at McKinsey believe data centers will require an eye-popping $6.7 trillion in global capital expenditures to keep pace with rising demand for AI workloads. Most of us are familiar with chipmakers like Nvidia, which designs the graphics processing units (GPUs) essential for running and training computationally demanding large language models (LLMs).
But GPUs are only one of the many hardware components that make AI possible. These algorithms are trained on vast amounts of data that must always be accessible to answer users' questions (known as inference). The data must be stored somewhere, and that's where Micron comes in. The company specializes in high-bandwidth memory (HBM) and advanced dynamic random access memory (DRAM), which temporarily stores data that a computer system needs to be able to access quickly.
In the past, Micron's business was highly cyclical with relatively modest growth as demand for its memory solutions fluctuated over time. However, generative AI promises to push the company into an unusual period of prolonged top-line growth, which is causing investors to quickly reevaluate how much they think the business is worth.
Investors also shouldn't overlook the impacts of government support, which saw the company win $6.1 billion in Biden-era Chips Act funding to expand its U.S. manufacturing. The company is also set to receive generous tax breaks under President Donald Trump's "big beautiful bill," passed this year.
Business is booming
Image source: Getty Images.
Micron's fiscal 2025 sales jumped 50% year over year to an all-time high of $37.5 billion. The company's gross margin (which represents the amount of money left after selling its products and accounting for production and delivery costs) expanded by 17 percentage points to 41%. While this is still significantly lower than Nvidia's gross margin of 72%, it is still relatively high for a hardware producer that sells physical products.
For context, AI server maker Super Micro Computer had a gross margin of just 13.1% in its most recent quarter. Micron's higher gross margin reflects its strong pricing power, which reflects well on the technological edge of its products and its economies of scale for producing them.
According to industry group Microchip USA, rising generative AI-related demand for data center hardware could trigger a supply squeeze in critical memory chips such as DRAM, DDR4, and NAND flash. And if the trend plays out as expected, it could lead to further margin expansion for Micron as it simply raises prices to match what the market will tolerate.
Micron isn't only taking advantage of AI to drive sales growth. It is also using the technology internally to assist with product design, development, and manufacturing. Management claims to have seen a whopping 30% to 40% productivity lift in some use cases.
Is Micron still a millionaire maker?
After Micron's substantial rally this year, most of the easy money has already been made. But with a forward price-to-earnings (P/E) multiple of just 16, the memory specialist still has plenty of room to run -- especially as rising data center demand promises to boost profitability. For context, Nvidia trades for a forward P/E of 30 while the Nasdaq-100 index averages 26. Micron shares look like a compelling long-term buy.
