Micron Technology (MU 5.68%) just released its earnings report, and the memory chip giant delivered blowout numbers driven by the insatiable demand for its high-bandwidth memory (HBM).
Conversely, rising memory costs have affected other tech stocks, and to that end, Apple stock dropped after announcing price increases on MacBooks and iPads due to rising memory costs.
That move raises questions about rising costs for other AI stocks. More specifically, investors should ask whether that undermines the investment theses driving these stocks.
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Micron's market power
Micron stock has become the AI stock to watch in recent weeks. AI applications depend heavily on HBM, and only three companies worldwide manufacture it, with Micron the only one based in the U.S.
Thanks to this demand, Micron generated more than $41 billion in revenue in the third quarter of fiscal 2026 (ended May 28). This was far above the $9.3 billion in revenue reported in the year-ago quarter.
Moreover, Micron forecast that bit shipments would grow in the low- to mid-20s percentage range. This implies that nearly all of the revenue increase came from price increases.
Additionally, one must assume that other companies will raise prices due to rising memory prices. This is likely to increase costs and squeeze margins for many AI companies, potentially slowing growth and boding poorly for their stock performance.
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Key Data Points
Adding some perspective
Investors should remember that these are short-term increases and that investing is typically a long-term journey. Long-time followers know that memory is one of the more cyclical parts of the semiconductor industry. Thus, they have seen Micron's revenue and income grow in times of high demand.
Still, once supply catches up to demand, companies like Micron will likely have to cut prices. This will probably lead to revenue declines, which will either reduce net income or even return the company to losses.
Furthermore, some investors may dismiss that trend because Micron eliminated its biggest risk by requiring customers to sign five-year contracts instead of the previous one-year agreements. Admittedly, that could force companies to pay higher prices for longer.
Nonetheless, such agreements do not impact the secondary memory market. Even if Micron and its competitors refuse to cut prices, AI companies should be able to buy HBM more cheaply as the supply shortage ends.
AI stocks and high memory prices
Given how the memory market has operated over time, investors should look for buying opportunities in AI hardware stocks if rising memory costs prompt selling. Indeed, high memory costs should concern companies that need AI hardware, and they will likely face higher costs for now as they pay premium prices for these sought-after memory chips.
Fortunately for Micron's customers, memory prices are cyclical, and as supply begins to meet or exceed demand, prices will likely fall, even with long-term contracts in place.
Thus, investors should treat rising memory prices as a temporary headwind or maybe a buying opportunity, but it is not a reason to give up on AI hardware stocks in the long term.
