Micron Technology (MU 4.47%) has been one of the best-performing stocks in the artificial intelligence (AI) space. Over the last year, it has risen by more than 680%, even factoring in a pullback in recent days.
Nonetheless, memory was historically a highly commoditized product, with prices governed largely by the laws of supply and demand. When the tech sector needed more than producers could supply, memory prices surged. When those manufacturers built more foundries and supply surpassed demand, prices experienced steep declines. That cycle has repeated many times.
Knowing that, should investors worry about that occurring in the next three years, or can they still expect to win with this semiconductor stock over that time frame?
Image source: The Motley Fool.
Micron's memory market
Although the memory chip cycle is a persistent concern in the industry, Micron can expect the high-demand phase of this one to be prolonged thanks to demand for its high-bandwidth memory (HBM). HBM is a critical component in AI build-outs, and Micron is one of only three companies that manufacture it at meaningful scale.
Thus, Micron's stock success over the next three years will likely depend on how the market for HBM fares. Its revenue continues to surge, and forecasts point to robust growth for the foreseeable future. Analysts on average project 247% growth for fiscal 2026 and 81% in fiscal 2027. Although investors typically do not react well to slowing growth under any circumstances, it remains unclear whether they would turn on the stock for that reason.
Also, analysts expect the HBM market to remain supply-constrained through 2027. Fortunately, even if supply does catch up with demand at that point, the market is tight enough now that Micron has been able to compel its largest customers to sign five-year contracts for its products instead of the one-year contracts that were previously the industry standard. This means that even if demand slows, Micron can probably command high memory prices for years to come.
Moreover, earlier in the year, Micron forecast a 40% compound annual growth rate for the total addressable market for HBM through 2028. Even if the company's growth were to slow to that rate, its stock would likely stay ahead of the S&P 500 (^GSPC 0.34%), which has delivered average returns of 15% annually over the previous 10 years.
NASDAQ: MU
Key Data Points
Furthermore, its net income in the first nine months of fiscal 2026 (a period that ended May 28) was more than $47 billion, far above the $5.3 billion earned during the same period in fiscal 2025. This has lowered its P/E ratio to just 21 times earnings, and its forward P/E of 13 probably means more multiple compression is coming.
Hence, with revenue growth likely to continue over the next three years, investors should expect a significant rise in Micron stock, though not necessarily the higher valuations that tend to accompany such revenue growth.
Micron in three years
Over the next three years, Micron stock will likely outperform the S&P 500.
Admittedly, Micron stock has a history of dramatic reversals when supply catches (or exceeds) demand. If that occurs, it could temporarily undermine Micron's investment thesis, so investors should watch the HBM market closely.
However, the outsize demand for HBM means supply is unlikely to catch up for years. Also, even though its revenue growth rates will almost certainly slow, a scenario where Micron's returns lag the S&P 500 seems unimaginable under current circumstances.
Thus, while the chip industry's cycles have probably not disappeared, investors probably won't have to worry about a dramatic negative turn over the next three years.
