The memory industry is known for its boom-and-bust cycles, in part because its products are highly homogeneous. Micron's competition with peers can lead to oversupply, as can SK Hynix or Samsung. (Reuters photo)
[Financial Channel/Comprehensive Report] Micron Technology is one of the biggest winners in the generative artificial intelligence (AI) infrastructure boom, with its stock price rising more than 800% in the past five years. After a staggering rise, can Micron Technology stock still turn a $1,000 investment today into $10,000 in the future? Or is this rally likely to fade soon? Foreign media The Motley Fool reported that investors should not be too optimistic. The main reason is that the memory industry is known for its boom-and-bust cycles, in part because its products are highly homogeneous, which can lead to oversupply in competition with peers. SK Hynix or Samsung will also face the same situation.
Micron's gains are mainly due to the growing market demand for its high-bandwidth memory chips, which are key components of AI data centers. Currently, demand for memory chips far exceeds supply, and given forecasts for building out AI infrastructure and the time it will take to build new fabs, this is unlikely to change for quite some time.
Many analysts believe that generative AI has the potential to be as transformative as past major trends such as the Internet and mobile phones. To seize this opportunity, technology giants are spending heavily on the hardware needed to build data centers to run and train large language models, and this hardware includes memory chips.
According to Fortune magazine, the four major hyperscale data center operators have pledged to invest a total of US$700 billion in the data center field this year. The high level of investment is expected to continue in the coming years, and Micron Technology is expected to continue to achieve ultra-rapid growth and huge profits.
Micron's performance in the second quarter of fiscal 2026 was strong. Revenue increased by nearly 200% year-on-year to US$23.86 billion, mainly due to the strong growth of the company's various business segments. While the surge in demand for memory hardware is primarily driven by the types of chips used in artificial intelligence data centers, an overall lack of capacity has led to higher prices for all types of memory chips, including those used in smartphones, laptops and other consumer electronics devices.
As a result, Micron Technology's mobile and client business units also gained amazing growth momentum, with revenue soaring 245% to $7.71 billion. Even more impressive, operating margins jumped from just 1% to 76%, turning the business unit, which was barely breaking even, into a cash cow with profit margins comparable to those of a software company.
Micron Technology's recent growth has exceeded expectations. Still, investors shouldn't expect this to last forever. The memory hardware industry is known for its boom-and-bust cycles, in part because its products are highly homogeneous.
There is no fundamental difference between the memory chips produced by Micron and those produced by its two main competitors, SK Hynix or Samsung. Additionally, when demand rises and memory chip makers can raise prices, they typically rush to expand production capacity, which ultimately leads to oversupply and a collapse in profit margins when new factories come online and demand reverses. Similar situations have occurred in past memory chip demand cycles, such as the Windows PC boom in the mid-1990s and the smartphone boom in the 2010s.
Unfortunately for investors, Micron and its peers appear to be setting the stage for a similar supply glut in the future. The company announced in June 2025 plans to invest $200 billion to expand its semiconductor manufacturing capabilities and research and development operations in the United States.
While this capital expenditure will be spread over several years, over time it will bring more high-bandwidth memory to the market. As Micron's competitors also invest in building new capacity, supply will eventually catch up and outpace demand, which will naturally weaken the chipmaker's pricing power and put pressure on its profit margins.
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