Just a few years ago, the memory market was in bad shape. Both the DRAM (dynamic random access memory) and NAND (flash memory) markets were oversupplied, and Micron Technology (MU 2.98%) saw its revenue cut nearly in half in fiscal 2023. Meanwhile, its debt ballooned to over $13 billion.
Fast forward to 2026, and the company is entering what looks to be a memory super-cycle, completely flipping the script from just a few years prior. As the artificial intelligence (AI) infrastructure buildout continues to ramp up, Micron is one of the best-positioned companies in the space.
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Micron is making new memories
Micron is one of the world's three main DRAM companies, alongside Samsung and SK Hynix. It also participates in the NAND market. About 80% of its revenue comes from DRAM and 20% from NAND.
DRAM has seen a huge surge in demand and prices due to the AI infrastructure buildout. The reason is that for graphics processing units (GPUs) and other AI chips to perform at their best, they need high bandwidth memory (HBM), which is a specialized form of DRAM. HBM stores data and allows AI chips to quickly retrieve and transfer it, greatly increasing processing speeds. Given the race to build large language models (LLMs) and have lightning-quick inference, demand for HMB has skyrocketed along with the AI data center buildout.
Meanwhile, the entire DRAM market is in short supply. This is because the DRAM companies are dedicating most of their production lines to higher return HBM, which requires three to four times the wafer capacity of standard DRAM. This shortfall in the DRAM market is driving up prices. The NAND market is also in short supply, due to a lack of production and demand for massive, high-performance solid-state drives (SSDs) using flash memory for AI data centers.
NASDAQ: MU
Key Data Points
Under these supply/demand conditions, Micron has, not surprisingly, seen its fortunes turn. Its revenue is surging, and its gross margins are expanding, which is leading to skyrocketing profits and strong free cash flow. This has helped the company flip to net cash positive on its balance sheet.
Looking forward, the company's HBM supply for 2026 is already sold out, and it expects demand to grow at a 40% annual pace through 2028. It's upped its capital expenditure (capex) budget for this year from $18 billion to $20 billion to increase capacity, but the market is likely to remain tight for the foreseeable future.
Given the current state of the memory market, Micron looks poised to be a huge AI infrastructure winner.
