Micron Technology (NASDAQ:MU) spent only $650 million on share repurchases in fiscal 2026. Earlier this month, its board approved a buyback of up to $35.16 billion, starting in early December. Micron can afford that jump because it ended the fiscal year with $73.48 billion in cash, marketable investments and restricted cash. But a cash pile this large raises an uncomfortable question about how long it lasts. Memory has a long record of booms that end in busts. Micron’s annual report says yearly changes in its DRAM and NAND prices have ranged from gains of about 200% to drops of about 50% over the past five fiscal years. So the real question is whether this boom has changed shape or has simply grown bigger.
The company makes DRAM, the working memory inside servers, phones and PCs, and NAND, the storage inside solid-state drives. AI data centers now buy so much of both that DRAM alone brought in $100.68 billion in fiscal 2026, more than Micron’s total sales the year before. Long-term contracts make this upswing sturdier than past ones, though they don’t remove the cycle, and the stock already prices in a fade. Investors who want more AI memory stocks can find Micron in our recent list 10 Best Future Stocks to Buy for the Next 5 Years.
AI Demand Has Reshaped Micron’s Business
Pricing has moved sharply in Micron’s favor, and gross margin reflects it. Adjusted gross margin was 87.0% in the fiscal fourth quarter, up from 45.7% a year earlier. That means Micron now keeps about 87 cents of every sales dollar after the cost of making its chips.
The newest products show where demand goes next. Micron began volume production of its HBM4 memory during fiscal 2026, the stacked memory built for AI workloads, and expects to ramp the next version, HBM4E, next year. For investors looking to add more high-bandwidth memory exposure, our list of 10 Fastest Growing High-Bandwidth Memory Stocks to Buy covers more names.
Long-Term Contracts Have Changed the Risk
Strategic customer agreements now cover part of Micron’s output. They are take-or-pay deals that bind customers to specific volumes over several years, and most carry prices with a minimum and a maximum. Customers backed them with cash deposits and letters of credit, and Micron’s cash flow statement shows $12.75 billion in customer contract liability deposits during fiscal 2026.
CEO Sanjay Mehrotra said the agreements add confidence in how durable Micron’s results will be. Guidance supports him, because Micron expects first-quarter revenue of about $61.5 billion, up from $54.23 billion in the fourth quarter.
Still, price bands put a ceiling on gains as well as a floor under losses. The larger risk lies outside the contracts, because Micron’s annual report warns that Chinese state-backed investment in rivals such as ChangXin Memory Technologies could cause DRAM and NAND oversupply. That doesn’t undo the case for durable profits, but it caps it, because contracts can’t stop rivals from adding supply.
Investors Are Pricing Micron for a Fade
The stock’s price shows how little the market trusts that protection. Micron trades at 4.98 times estimated fiscal 2027 adjusted earnings per share. That forward price-to-earnings ratio measures what investors pay today for each dollar of profit analysts expect this fiscal year. The sector median is 21.01, so Micron costs a fraction of the typical technology stock, even though analysts expect its earnings per share to grow 133.77%.
Its five-year average of 74.24 looks odd. Earlier years of thin profits stretched it, such as fiscal 2025, when adjusted earnings per share were $8.29 against $75.52 in fiscal 2026. So the low multiple signals doubt, because analyst estimates already show earnings growth cooling after fiscal 2027 and turning negative by fiscal 2029. If you’re looking for more cheap AI names, check out 10 Undervalued AI Stocks to Buy Now.
Hedge funds are leaning the other way, since 184 of them held Micron in the most recent quarter of filings, up from 154 the quarter before. That means more large funds chose to own it. Short sellers, who borrow shares and sell them hoping to buy them back cheaper, hold 2.31% of the float, the shares available for public trading. That small share means the doubt sits in the price rather than in a crowded bet against the stock.
The board’s buyback shows which side it has taken, and the contracts probably protect Micron’s margins for as long as they run. They can’t protect anything beyond that, because rivals can still add supply. If you own the shares, you hold record profits at a price that assumes they won’t last. Micron’s next report is the thing to watch, since revenue near the $61.5 billion it guided to would show the cycle hasn’t turned.
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This article is originally published at Insider Monkey.
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