Micron Technology (MU +5.00%) has been one of the biggest winners in the generative artificial intelligence (AI) infrastructure boom, with shares up by over 800% over the last five years. The rally has been driven by growing demand for its high-bandwidth memory chips, which are vital components in AI data centers. At the moment, demand for memory chips well outstrips supply, and given the forecasts for the AI infrastructure build-out and how long it takes to get new foundries up and running, that situation is unlikely to change for quite awhile.
But after its impressive gains of recent years, can Micron stock still turn $1,000 invested today into $10,000 in the future, or is this rally more likely to fizzle out soon? My view: Investors shouldn't get too comfortable.
NASDAQ: MU
Key Data Points
Why is Micron soaring?
Many analysts believe generative AI could be as transformational as previous megatrends like the internet and mobile phones. And to capitalize on the opportunity, technology giants are spending eye-popping sums of money to accumulate the hardware needed to build data centers that run and train large language models -- and that hardware includes memory chips.
According to Fortune magazine, the four major hyperscalers have committed to spending a combined $700 billion on data centers this year alone. And with high levels of investment expected to continue for the coming years, Micron is well positioned to continue generating outsize growth and profits.
Its fiscal 2026 second-quarter results were explosive. Revenue soared by almost 200% year over year to $23.86 billion, driven by strength across the company's business segments. And while the surge in memory hardware demand has been driven specifically by the types of chips used in AI data centers, a shortfall in overall production capacity has caused prices to rise for all kinds of memory chips, including the ones used for things like smartphones, laptops, and other consumer devices.
As a result, Micron's mobile and client business unit saw stunning momentum too, with revenue jumping 245% to $7.71 billion. More impressively, operating margins jumped from just 1% to 76%, transforming a business that was barely breaking even into a cash cow with margins comparable to those of software companies.
A history of booms and busts
Micron Technology's recent growth is exceeding expectations. That said, investors shouldn't expect this situation to continue forever. The memory hardware industry is known for boom and bust cycles, in part because of how commoditized its products are.
A memory chip created by Micron is not fundamentally different from a chip created by SK Hynix or Samsung -- two of its chief rivals. Moreover, when demand rises and memory producers can raise prices, they all typically race to expand production capacity -- setting the stage for an eventual supply glut and collapsing margins when the new foundries are online and the demand situation reverses. Similar stories played out in previous memory demand cycles, such as the Windows PC boom in the mid-1990s and the smartphone boom in the 2010s.
Image source: Getty Images.
Unfortunately for investors, Micron and its peers seem to be setting the stage for a similar glut to occur in the future. In June 2025, the company announced plans to invest $200 billion into expanding its semiconductor manufacturing capacities and its R&D operations in the U.S.
While this capital expenditure will be spread over several years, it will introduce significantly more high-bandwidth memory to the market over time. As Micron's rivals make their own investments in new capacity, eventually, supply will catch up to and exceed demand, which will naturally cut into chipmakers' pricing power and put pressure on their margins.
There is also the risk that the generative AI sector as a whole is in a bubble. And even if the technology turns out to be extremely useful, that doesn't necessarily mean the current levels of data center spending are sustainable. The situation looks reminiscent of the dot-com bubble in 2000, where internet investments took much longer to pay off than the market expected.
Micron stock is relatively cheap for a reason
With a forward price-to-earnings (P/E) ratio of just 7.8, Micron stock is significantly cheaper than the S&P 500's average of 22. And this is a good sign because it suggests that investors are already pricing in the risk of a future memory demand slowdown. That said, while Micron Technology's stock looks unlikely to crash anytime soon, its days of multibagger growth are probably coming to an end.
