This AI Memory Workhorse Still Has Room In The Tank

Author

Noah Zelvis
December 03, 2025

You do not need to memorize every alphabet soup of memory formats to follow this one.

Focus on how tight supply and demand really are, whether that is showing up in higher prices and fatter margins, and how many years the AI build-out can run before the industry inevitably overbuilds again.

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What Just Happened

Micron Technology (NASDAQ: MU) has gone from forgotten to front row.

  • The stock trades around 240, up roughly 175% year to date and about 144% over the past year

  • Market cap sits near 270 billion

  • It is at roughly 32 times trailing earnings, with a small 0.19% dividend and a 52-week range of about 62 to 261

Management guided for fiscal Q1 2026 revenue of about 12.5 billion, up around 45% year over year, and non-GAAP EPS of 3.75, more than double the prior 1.79. That is not a gentle recovery, that is a launch.

Wall Street is happily leaning in:

  • Morgan Stanley: Buy, target lifted to 338

  • Rosenblatt: Buy, target raised to 300 from 250

  • Wells Fargo: Overweight, target up to 300 from 220 after meetings with management

On top of that, Micron plans to invest about 9.6 billion dollars in a new high-bandwidth memory plant in Hiroshima, with Japan covering up to roughly 500 billion yen in subsidies, and shipments expected around 2028. You do not build that kind of factory if you think this is over next year.

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The Strategy In Plain English

Old Micron: sell DRAM and NAND into PCs, phones, and servers, and ride the usual roller coaster.

New Micron:

  • Focus on high-bandwidth memory and server memory that feed AI accelerators

  • Use limited high-end capacity for the most profitable products

  • Let the AI rush tighten supply across the rest of the memory market, lifting prices for more standard parts

  • Use scale and cost control, so more of every price increase falls straight into profit

In short, point the factories at the AI candy first, let the rest of the market feel the squeeze, and enjoy higher prices and better mix.

The Hiroshima plant fits that plan. It adds future HBM capacity in a friendly, subsidized region, diversifies away from Taiwan exposure, and aims squarely at the next wave of AI data center demand.

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Why It Is Not A Free Lunch

None of this means MU is suddenly risk-free.

  • The stock has already had a monster run, so the easy money feeling is gone

  • Memory has a long history of boom, then too many fabs, then ouch

  • New fabs take years and billions, and they do not care if demand cools halfway through construction

  • Competitors like SK Hynix and Samsung are just as hungry in HBM and will also chase this upside

You are not buying a sleepy bond proxy. You are signing up for a more powerful but still cyclical engine that happens to be in a very good part of the cycle.

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The Good Stuff You Can Bank On

  • Supply and demand finally play nice
    Research firms estimate DRAM prices are up about 50% in 2025, with server DRAM potentially doubling by the end of 2026.

    Micron’s revenue growth near 50% and gross margins moving toward the low 50s are exactly what that looks like in the income statement.

  • AI demand is a real driver, not a side quest
    AI training and inference need huge pools of fast memory.

    Micron’s data center business, including HBM, is already more than half of revenue, which puts it in the center of AI infrastructure capex, not on the sidelines.

  • Margins are actually fixed, not just promised
    After negative margins in 2023, Micron has moved back into the 40% plus gross margin zone and is guiding higher.

    That shows pricing power, mix, and cost work are all firing.

  • Valuation is punchy but not insane
    At about 32 times trailing earnings and roughly low teens on forward estimates, MU is cheaper than many AI names once the expected growth is baked in.

    The PEG ratio is very low because analysts see fast earnings growth over the next few years.

  • Governments are writing checks
    Japan’s support for Hiroshima and US CHIPS money for domestic fabs help defray capex and support long-term planning.

    That reduces some financing risk around this build-out.

The Rub You Should Respect

  • It is still a memory stock
    AI demand stretches this cycle, but it does not repeal the law of supply.

    If everyone builds too much capacity at once, pricing will take a hit, even if the long-term story is intact.

  • HBM eats fab space
    High bandwidth memory uses more wafer area per bit than plain vanilla DRAM.

    That is good for pricing and margins now but makes product mix and capacity planning more delicate if the AI boom cools or customers push back on pricing.

  • Capex is heavy and slow to reverse
    Huge new fabs that start up in 2027 and 2028 cannot be quietly turned off if demand disappoints.

    Returns on that investment depend on the AI cycle cooperating.

  • Customer concentration in AI land is real
    A big slice of growth comes from a handful of hyperscalers and GPU players.

    If a couple of them pause AI spend or roll more memory in-house, expectations will reset quickly.

  • Policy and macro can interfere
    Export rules, trade friction, or subsidy changes can alter where Micron can ship its most advanced parts.

    That sits on top of the usual economic cycle.

What This Means For The Next 3–4 Quarters

Think of the next year as the truth test for the AI memory supercycle.

You want to see:

  • Multiple quarters where revenue growth stays strong, not a one-and-done spike

  • Gross margins holding in the 40s and nudging higher as HBM mix rises

  • Clear evidence that HBM and server memory are booked out, not just hyped on slides

  • Concrete progress on fab projects without scary jumps in net debt

  • No big cracks in PC or phone memory demand that would hint at the old ugly cycle roaring back full speed

If that shows up, the case for this being a longer and more profitable upcycle gets much stronger.

Bull case:

  • AI data centers keep absorbing premium memory for years while HBM capacity stays tight

  • DRAM and NAND pricing stays firm into 2027 as supply takes years to catch up

  • Margins hold near 50% and earnings compound faster than consensus models today

  • New fabs land into continued demand, letting Micron grow into or even past the 300 plus targets

Bear case:

  • Hyperscalers slow AI capex just as major new capacity ramps

  • Rivals crowd the HBM market, pushing prices down sooner than expected

  • Macro or policy shocks hit tech spending right when capex peaks

  • After a 150% plus run, the stock derates sharply on any hint that growth or margins are topping out

Valuation And Action Recap

At roughly 32 times trailing and around low teens on forward earnings with a small dividend, MU is priced like a growth stock in a sweet spot, not a sleepy cyclical.

The bet is that this AI-driven memory cycle is longer, tighter, and more profitable than the last few.

If you believe AI infrastructure spend stays strong, HBM scarcity keeps pricing and margins elevated, and new fabs roughly match demand instead of racing ahead of it, Micron can still have room to run from here.

If you think memory will be memory, and we are one big build-out away from another hangover, there is plenty of air under the stock.

Action Recap

✅ Starter or core on red days: Consider MU as a core AI infrastructure holding, built gradually rather than chased on big up days
✅ Add on proof: Add only if you see several quarters of strong growth, high margins, and disciplined capacity plans
⚠️ Trim on trouble: Be ready to take some profits if guidance softens, HBM pricing cracks, or capex ramps faster than demand

That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.

Best Regards,
—Noah Zelvis
Tech Stock Insider