Behind every AI company is a memory provider working overtime to keep up with demand. That's why Micron Technology (MU +0.52%), a manufacturer of computer memory, could be the biggest surprise of 2026.
NASDAQ: MU
Key Data Points
Of course, we know Micron stock has shot up by more than 260% over the past 12 months, but the surprise is that the company will be in the driver's seat for high-bandwidth memory (HBM) for the next several years. Micron specializes in this type of memory that is vital for artificial intelligence processing. Supply is so far outpacing demand that Micron is already completely sold out through 2026.
Remember, AI is nothing without memory
Memory is essential to AI's cognitive function. According to Micron's latest investor presentation, AI relies heavily on advanced memory for real-time contextual processing. This has applications from AI data centers to self-driving cars and even medical diagnostics.
A visual of a network with 'AI' written in the middle of the center computer chip.
In its first-quarter fiscal 2026 earnings, Micron reported revenue rose 57% year over year to $13.6 billion. Gross margin was nearly 57%, but the company anticipates it expanding to 68% in Q2. This top-line growth means greater profitability and potentially higher rewards for shareholders through stock buybacks and dividends. In the past couple of years, Micron has spent $1 billion repurchasing 13 million shares and paid out $1.7 billion in dividends.
The memory market could hit 12 figures soon
The HBM market is expected to grow at a 40% compound annual growth rate (CAGR) through 2028. Micron expects the total addressable market to reach $100 billion by then. That milestone could be reached two years earlier than Micron originally anticipated.
Of equal importance is the leverage Micron holds in HBM pricing. Since supply is so limited, Micron can capitalize on unprecedented demand and raise prices accordingly.
The biggest risk to Micron right now is a faltering market for HBM. If AI overall plateaus or adoption slows, this would directly impact Micron. That seems somewhat unlikely, as the company is making plans to open new plants and expand existing ones in order to fulfill customer orders.
The stock has room to keep growing
Micron's stock is up 38% year-to-date as of Jan. 22. Even with this substantial rise in price so early in the year, Micron is still fairly valued. Its forward price-to-earnings (P/E) ratio is currently around 12. This multiple is much lower than the tech industry average, which ranges in the mid-20s. The company's market cap has exploded to over $400 billion as of Jan. 22.
I still think there's a lot of room for Micron to grow, and the company says it is working to secure more multiyear contracts that'll lock in growth for the foreseeable future. While the headlines focus on the world's major AI players, the biggest surprise could be the behind-the-scenes memory makers like Micron.
