AI workloads are driving demand for both high-bandwidth memory (HBM) and standard DRAM, and suppliers are struggling to keep up. The situation is complicated by the fact that HBM and conventional DRAM, which serve distinct roles, are competing for manufacturing capacity.
The latest industry data suggest the supply constraint may persist into 2027. That strengthens the case that Micron Technology, Inc. (NASDAQ:MU)’s current earnings surge could be more durable than in the previous memory cycles.
The test for the company is allocating scarce capacity and defending strong pricing. Micron has footprints in both HBM and DRAM markets, and it supplies many leading AI infrastructure programs. Through strategic agreements with customers, the company is locking in demand at favorable prices.
Micron Trades at Just 6.5x Earnings — So What Could Make Investors Pay a Much Higher Multiple?
Micron Looks Cheap on Current Earnings
Micron’s GAAP net income shot up to $37.7 billion in fiscal Q4 2026, from $3.2 billion in the year-ago quarter. Fiscal 2026 net income surged to $85 billion, rising sharply from just $8.5 billion in fiscal 2025. Revenue similarly surged to $133.2 billion from $37.4 billion.
At the October 1 closing price of 1,097.39, Micron’s market cap was around $1.24 trillion. That’s about 14.5x fiscal 2026 earnings. But annualizing the $37.7 billion profit in the latest quarter produces about $151 billion of earnings. That reduces the multiple to about 8.2x.
Micron Technology, Inc. expects fiscal 2027 to be even stronger. It’s forecasting fiscal Q1 revenue of about $61.5 billion and non-GAAP EPS of roughly $38.15. Annualizing the EPS implies about $153. At the October 1 closing price, that would work out to about 7.2× annualized non-GAAP EPS.
Supply May Stay Tight Longer Than Expected
The current memory cycle could last longer than the previous cycles.
Micron expects the memory industry to remain tightly supplied through 2028. It sees industry DRAM bit shipments growing in the low-20% range in both 2027 and 2028. The company also expects HBM shipments to grow faster than conventional DRAM through 2028.
HBM is particularly important for high-power AI workloads, yet it competes with standard DRAM for manufacturing capacity. Samsung expects HBM to consume nearly 30% of global DRAM wafer capacity in 2027, compared with about 20% currently. That can constrain standard DRAM supply amid strong demand for conventional memory.
The pricing environment reflects that scarcity. TrendForce reported that DRAM industry revenue rose 59.5% sequentially to $154.73 billion in the Q2. That was due to prices increasing sharply as supply expansion lagged demand.
Micron Technology, Inc. has signed 26 strategic customer agreements covering more than 35% of expected revenue through 2030. Three-quarters of that expected revenue has a defined pricing framework.
Micron Technology (MU) is Printing Cash. Can its Memory Momentum Last?
The Valuation Problem Is Earnings Durability
Micron Technology, Inc.’s bullish case is not difficult to understand.
If the company can sustain a large portion of its current earnings, an 8× run-rate GAAP P/E, or roughly 7× based on annualized Q1 non-GAAP EPS, could prove inexpensive.
But investors shouldn’t assume that today’s earnings power will continue indefinitely. Micron exited fiscal 2026 with $73.5 billion of cash and investments. But the company is also increasing capital spending to expand capacity.
The sensitivity is difficult to ignore.
At a $1.24 trillion market cap, $150 billion of annual earnings would represent roughly 8.3× multiple. At $100 billion, the multiple rises to about 12.4×. At $75 billion, it reaches around 16.5×. And at $50 billion, it approaches 25×.
That’s what investors are underwriting.
So the question is not whether Micron can earn $150 billion during the current memory shortage. It’s whether AI-driven demand can keep Micron’s normalized earnings much closer to the current extraordinary levels for longer.
Hedge Fund Holdings Rise, Short Interest Falls
Hedge funds holding Micron Technology, Inc. shares increased to 184 in Q2 from 154 in Q1. Short sellers, meanwhile, have become less aggressive. Short interest fell to 2.5% of the float, from 2.6% in the previous reading.
Micron stock looks inexpensive if current earnings are durable, but much less so if the memory cycle eventually normalizes.
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