The generative artificial intelligence (AI) megatrend has allowed many older technology companies to rise from relative obscurity. And with its shares up by a whopping 170% year to date, Micron Technology(NASDAQ: MU) is an excellent example. Like the industry leader Nvidia, it serves the pick-and-shovel side of AI, supplying hardware that other companies will need to create consumer-facing software and services.
Let’s dig deeper to see if it still has millionaire-maker potential.
While the AI hardware narrative tends to focus on graphics processing units (GPUs), which do the brunt of the work of running and training large language models (LLMs) like ChatGPT, there are other computer components that make the technology possible. Micron’s high-bandwidth memory devices, such as DRAM and NAND flash, play a crucial role.
The vast libraries of AI training data need to be stored somewhere. Furthermore, these algorithms rely on powerful working memory to access data in real time and answer users’ questions. Micron is America’s largest computer memory specialist, so it was only a matter of time before investor capital began flowing in. And the stock’s growth isn’t just based on hype. Operational results are also showing significant progress.
Fiscal fourth-quarter revenue surged 49% year over year to $37.38, driven by an explosion of demand from data center clients, which tend to focus on AI-related workloads. Micron is also seeing a sustained rise in gross margins (which are up from 35.3% to 44.7% year over year) as its product mix shifts toward higher-end memory products, which can command better pricing. There is still potential for continued improvements.
Historically, computer memory has been a highly cyclical industry prone to boom-and-bust cycles. This trend occurs because the products are generally commoditized and poorly differentiated from each other while having high fixed production costs and slow manufacturing lead times. When demand is high, producers invest in expanding their production capacity, leading to a glut when supply outstrips demand and pricing strategies become a race to the bottom.
These are fundamental characteristics of the industry. And unfortunately for Micron, there is no reason to believe that things will change anytime soon. That said, generative AI is already sparking a massive boom cycle for memory hardware that is very likely to continue in 2026 and beyond.
Image source: Getty Images.
Reuters reports that the ravenous generative AI demand is leading to shortages all across the computer memory industry as producers shift production capacity to higher-demand products. This trend means Micron may be able to command higher prices across its product line (which includes memory for devices ranging from smartphones to automobiles) as demand begins to outstrip supply.
Furthermore, analysts at Wells Fargo believe DRAM industry revenue could double in 2026, setting the company up for a huge amount of profit it can return to shareholders.
With a forward price-to-earnings (P/E) multiple of just 14, Micron stock is still remarkably cheap, despite its legendary rally in 2025. And memory hardware shortages could help the company maintain its outstanding momentum. While Micron probably won’t make you a millionaire (because the current memory boom probably won’t last forever), it looks poised for continued market-beating performance in 2026 and beyond.
The company will likely return a large portion of its growing profits to shareholders through its buyback program, which it resumed last year. While buybacks can feel less tangible than cash dividends, they are a better way to reward shareholders because they come with tax advantages. Dividends are taxed as ordinary income, while stock price appreciation is not taxed until you sell.
Furthermore, a buyback strategy could help smooth out the inherent cyclicality of Micron’s business model by reducing the number of shares outstanding relative to future earnings.
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Wells Fargo is an advertising partner of Motley Fool Money. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
