Micron Technology's stock is on an impressive upward trajectory, and here's why it could keep rising.
Historically, Micron (MU) took a staggering two decades to recover from its peak during the dot-com bubble at the start of the 2000s. However, since reaching a new record high in 2021, the company's share price has surged dramatically, soaring nearly 400% over the past three years.
With such significant gains, investor enthusiasm is palpable. Yet, following the company's fiscal Q1 2026 earnings report on December 17, it appears that this enthusiasm might not fully capture Micron's vast potential. The favorable business trends suggest that investors may be underestimating what lies ahead for the next three to five years, indicating there could still be room for further growth in Micron's stock price.
Let's look at the bigger picture. Investors often approach Micron with caution, primarily due to its cyclical nature, as illustrated by the stock's historical fluctuations between 2005 and 2020. If these boom-and-bust cycles persist, one might question the sustainability of any current discussions about growth. However, a significant shift is currently taking place, which might allow Micron to break free from its typical cyclical behavior.
This transformative trend is centered around artificial intelligence (AI). While many investors have heard about AI's potential, there remains substantial infrastructure work necessary to meet the ambitious goals set by leading tech companies.
As major corporations develop new data centers filled with NVIDIA graphics processing units (GPUs)—the crucial component that powers AI applications—it's important to recognize that the AI technology ecosystem extends beyond just GPUs. The current focus has been on generative AI, where models analyze extensive datasets to create new outputs. Yet, we're now witnessing a shift toward agentic AI, which actively serves users in a more personalized manner, thereby driving demand for additional computer memory.
This transition to agentic AI significantly increases the need for memory resources, placing computer memory manufacturers like Micron in a prime position to benefit from surging demand.
So, what makes Micron particularly appealing right now? In the latest quarter, Micron reported an astonishing 57% year-over-year revenue increase, with more than 20% growth compared to the previous quarter. This remarkable performance isn't just a one-time occurrence; it seems to signal a new trend for the company.
For the fiscal Q2 2026, management is projecting revenues of $18.7 billion. Should they achieve this goal, it would represent a staggering 132% increase compared to the previous year, approaching the company's fastest growth rate ever recorded during the dot-com era.
A key factor driving this surge is the demand for high-bandwidth memory (HBM), essential for AI applications that require not only memory but also rapid access speeds. Micron stands out as a leader in the HBM market. Management anticipates that the HBM sector will expand threefold between 2025 and 2028, indicating a robust future for Micron's most sought-after products. It's noteworthy that the company has already sold out its supply for 2026 and is in discussions with clients regarding orders for subsequent years.
Historically, Micron has faced challenges with oversupply when demand softened, leading to lower profit margins—a trend seen across many semiconductor firms, including GPU manufacturers. However, the current AI boom has maintained GPU demand far better than anticipated, as demonstrated by NVIDIA's recent performance. The disparity between demand and supply can lead to significant profit margins, and we are witnessing similar dynamics at play with Micron.
In the first quarter, Micron achieved a profit margin of 38%, contrasted with its decade-long average of just 14%, according to YCharts. For the upcoming second quarter, the company expects earnings per share (EPS) to hit $8.19, surpassing profits from most previous years.
If revenue continues to climb over the next three years as management suggests, Micron could experience unprecedented profitability. This is why I believe that Micron's stock has the potential to soar even higher, despite its already impressive recent performance.
What are your thoughts on Micron’s growth? Do you think its stock will continue to rise, or are there factors that could hinder its progress? Share your opinions in the comments!
