In Amazon's 2026 second-quarter earnings call on July 30, CEO Andy Jassy forecast that capital expenditures would likely reach $220 billion for the year. That's up from a previously expected $200 billion, which was attributed to higher memory costs.
Still, Jassy said that increasing spending on artificial intelligence (AI) infrastructure may not be enough to keep up with demand:
Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027, too. In fact, the demand we already have for 2028 is striking.
Seemingly, that would be good news for Micron Technology (MU -1.95%), as its high bandwidth memory offerings play a key role in AI infrastructure, showing that even at higher prices, demand is likely to remain strong.
The Micron stock price, however, didn't benefit after Amazon reported earnings, dipping 5.9% from $874.66 on July 30 to $823.03 on July 31.
Image source: The Motley Fool.
Why the Amazon news didn't move the needle
The most likely reason Amazon's increase in capital expenditures didn't help Micron's stock price was that the stock had already rallied, climbing 18.3% from the July 29 closing price of $739 to the July 30 closing price of $874.66. What helped was Samsung Electronics' announcement that strong earnings and forecasted memory chip shortages would persist through 2028.
Broadly, that was bullish news for Micron, which had been suffering a sell-off alongside the rest of the memory chip sector before Samsung's earnings announcement.
In the background, what could also have been weighing on sentiment around Micron is interest rate hikes. The Federal Open Market Committee decided to leave interest rates unchanged on July 29, but three members dissented and favored a quarter-point rate hike. Some investors may have started selling their tech stocks in anticipation of future rate hikes.
Finally, when Micron's shares shot up more than 18% on July 30 and regained some ground, there may have been some profit-taking on July 31. As of this writing, over the last 12 months, the Micron stock price is up more than 660%.
NASDAQ: MU
Key Data Points
Micron's business model is shifting
Despite the boon AI has been for Micron, there are still fears that, when supply catches up with demand, Micron and other memory stocks will return to a cyclical boom-or-bust pattern.
In that regard, supply is still not expected to catch up to demand until at least 2028. But if that milestone arrives earlier than anticipated, Micron is preparing itself. The company is locking in long-term deals, which may impact margins but offer more predictable cash flow. In Micron's fiscal 2026 Q3 earnings call, it announced that it had signed 16 strategic customer agreements and had $22 billion in cash deposits and related financial commitments.
Micron may still have a few more years with higher margins for its memory and storage offerings, as supply isn't expected to catch up with demand any time soon. Despite the recent sell-off, Micron is likely to continue to do well over the next two years. After that, however, there may be an adjustment period as it shifts to more reliable revenue with lower margins through long-term contracts.
Ultimately, an investment in Micron depends more on the deals it's locking in for long-term revenue, on whether it executes on becoming less known for cyclical results, and on whether the market appreciates its business model shift.
