On June 17, the Federal Reserve will reveal its next decision about where to set the benchmark federal funds rate. It's a date circled in red on many investors' calendars, and buying the right growth stocks before that interest rate announcement could enhance your returns.
Micron (MU +0.90%) might be one of those stocks. The company already has strong fundamentals, and any positive developments from the Fed meeting could help send the stock higher.
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Micron won't need help from the Fed to produce solid returns
Micron provides memory chips that are critical to the AI boom. You will find these chips inside many Nvidia (NVDA +1.30%) products and also deployed adjacent to them in servers. While the memory chip industry has historically been heavily cyclical, the continuing high demand for AI chips and the big investments that other big tech players are making in memory-chip makers suggest the current boom phase could last for several more years, at least.
NASDAQ: MU
Key Data Points
Tech giants are willing to invest capital and resources in memory-chip makers so they can produce more chips. That's going to improve margins, and it suggests that the explosive growth of recent quarters is set to continue.
In its fiscal 2026 second quarter, Micron almost tripled its revenue year over year, and management anticipates $33.5 billion in fiscal 2026 third-quarter revenue. That would be a 40.4% sequential improvement before the Federal Reserve does anything.
The memory-chip maker closed its most recent quarter with a 57.8% net profit margin. So profitability isn't a problem for this company.
Lower interest rates would reduce borrowing costs across the AI industry
Even though Micron is booking high profits, it still borrows money to expand its chip production. Micron said earlier this year that it plans to spend $200 billion over the course of several years to expand its global manufacturing footprint. As impressive as Micron's profits have been -- $13.8 billion in fiscal Q2 alone -- covering a capital investment plan that large will require other sources of funds.
Loans, government programs, and subsidies will cover the difference, and that makes the Fed's rate decisions highly relevant for Micron. Any future rate cuts will reduce the cost of borrowing money, which will help Micron realize higher profits. Lower rates would also make it easier for Micron to scale its memory-chip production at a faster rate.
While lower interest rates would be a benefit to Micron, they would mean even more to companies further downstream in the AI sector. Data center operators like Nebius, Iren, and Cipher Digital must borrow substantial amounts of money to fund their infrastructure build-outs. These data centers will increase the demand for memory chips, and lower interest rates make it easier to build those facilities.
Micron isn't as exposed to the impacts of interest rates as data center specialists or many other companies in the AI industry. However, in this case, what's good for the goose is good for the memory-chip gander.
