Micron Technology (NASDAQ:MU) has become one of the biggest beneficiaries of the artificial intelligence boom. Jim Cramer believes the bigger question for shareholders is how the company should deploy the exceptional cash flow now being generated by its memory business. On August 24, the Mad Money host noted:
Now, Micron’s making a killing right now. It has a gross margin of more than 80%. That’s huge, one of the greatest in the entire market.
The company reported an adjusted gross margin of 84.9% in fiscal third quarter 2026, up from 39% a year earlier. Revenue reached a record $41.46 billion, while adjusted free cash flow climbed to $18.3 billion. The debate is whether that cash should fund more manufacturing capacity or return to shareholders through buybacks.
Micron Technology’s (NASDAQ:MU) earnings are benefiting from rising demand for memory used in AI infrastructure. The company is committing more than $250 billion through 2035 to expand its U.S. semiconductor manufacturing and R&D footprint. Cramer sees that spending as an investment in the company’s competitive position.
What’s the most responsible thing to do? Alright, to me, it’s exactly what Mehrotra’s doing. He’s spending big to make sure Micron’s the biggest and the best.
Micron Can Invest and Return Capital
Now, some shareholders don’t want growth; they want return. I think that like SK Hynix, the largest company in the memory space, that’s a Korean company, Micron can do both.
Cramer’s above comment during the episode used SK hynix Inc. (NASDAQ:SKHY) as a useful comparison. In August, it announced plans to repurchase and cancel approximately 40 trillion Korean won, or about $28.6 billion, of its own shares between August 20 and November 19. The comparison highlights the opportunity cost for MU shareholders. Micron will need to show that its retained capital can generate better returns than an equivalent buyback. The company has an existing $10 billion share-repurchase authorization, while management has said it intends to return 100% of excess cash to shareholders.
Bear Thesis
The biggest risk to Micron Technology (NASDAQ:MU) is not weak execution, but the possibility that the current memory cycle is already reflected in the stock. Adjusted gross margin reached 84.9% in fiscal third-quarter 2026, compared with 39% a year earlier, showing how dramatically profitability has improved. However, memory remains cyclical, and margins can fall quickly when supply catches up with demand. There is also the risk of AI demand slowing or competitors adding capacity faster than expected. The company could face weaker pricing just as new fabs come online, increasing the opportunity cost of retaining cash.
Moreover, valuation adds another concern. Micron’s stock had already gained roughly 220% year to date when Cramer made his bullish comments. The bear case is that memory demand remains healthy, but margins normalize, and earnings growth slows enough to make the expectations embedded in the stock difficult to justify.
Institutional Sentiment and Short Interest
Insider Monkey, which tracks more than 1,000 elite hedge funds through quarterly 13F filings, recorded 184 hedge funds holding MU in Q2, up from 154 in Q1. Additionally, short interest remains relatively modest, standing at roughly 2.66% of the float. It shows measured caution rather than aggressive bearish positioning. Cramer’s bullish thesis comes down to whether Micron Technology (NASDAQ:MU) can generate better returns by reinvesting its cash than it would by returning that cash immediately to shareholders. He said:
I support Micron’s strategy, not just because it’s good for American manufacturing, but more importantly because it’s good for the stock.
READ NEXT: Jim Cramer Compares Enterprise Software Dynamics in Workday and ServiceNow and Jim Cramer Examines PayPal Holdings Performance Under Enrique Lores and M&A Speculation.
Disclosure: None. Follow Insider Monkey on Google News.
