Earlier this year, pretty much everyone in the financial media was pondering the same question: when, or if, the artificial intelligence (AI) bubble would pop.
Despite that, the bubble (if there is one) has yet to pop. Even though the hype has begun to fade and caused a sell-off in parts of the tech sector, AI stocks remain pretty resilient. That's particularly true for hardware stocks like Micron Technology (MU +0.90%).
Micron dropped from its high of $464 in mid-March down to $362 after news broke that Alphabet had developed an impressive new data compression algorithm that is expected to mitigate the current memory shortage.
However, since the end of March, Micron has been clawing its way back up. As of the morning of April 13, it was up by more than 23% month to date at more than $417 per share. I don't think its rebound is going to stop anytime soon.
Here's why.
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Micron makes digital memory hardware -- specifically, random access memory (RAM) and dynamic random access memory (DRAM) chips, with a focus on designs for AI applications.
For instance, Micron is behind the HBM4 memory chip that goes into Nvidia's new Vera Rubin platform. These chips allow a computer to store and rapidly recall information. That's key in AI processes, which depend on handling massive quantities of data.
Alphabet has mitigated the memory shortage slightly with its TurboQuant algorithm, which allows data files to be compressed to one-sixth their previous size, thus reducing the amount of digital memory required to store them.
On the face of it, that looks bad for Micron and the other two dominant players in the memory market, Samsung and SK Hynix. However, even with TurboQuant, we are still deep in a memory shortage.
Intel CEO Lip-Bu Tan has said he doesn't think the memory shortage will be alleviated until 2028. However, SK Hynix Chairman Chey Tae-won believes there will be a 20% undersupply of memory wafers that could continue out to 2030 as the big memory producers expand their manufacturing capacity.
Memory supply is the real bottleneck that AI must overcome -- not power, not processors, not data centers.
To that end, Micron is investing $100 billion to build a colossal factory in upstate New York, which, when completed, will be the largest U.S. semiconductor factory ever.
So, while the memory hardware industry has been cyclical in the past, this up cycle is likely to persist for several years at least. Micron has already been benefiting from that.
NASDAQ: MU
Key Data Points
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Micron has been on a tear in its fiscal 2026. In its fiscal first quarter (which ended Nov. 27), it generated $13.6 billion in revenue, up 57% year over year.
Then, for its fiscal second quarter (which ended Feb. 26), it brought in $23.9 billion, up 196% year over year. That was also well above the $18.7 billion that the company had been guiding for when it delivered its fiscal Q1 numbers.
Speaking of guidance, Micron now says it anticipates $33.5 billion in revenue for the third quarter of its fiscal 2026. That would be more than triple the amount it generated in fiscal Q3 2025.
As if that didn't sound incredible enough already, Micron also has a net profit margin of 41.5% and a healthy total debt-to-equity ratio of 0.15, even though it has already begun spending loads of money on a brand-new factory.
Finally, at current prices, Micron has a price/earnings-to-growth (PEG) ratio of 0.39, which is well below the 1 that is considered to be a fair value. So even at over $400 a share, Micron is looking to be a bit of a bargain.
All things considered, Micron is worth a look for your portfolio at the very least.
