Micron: A Memory and a Fortune

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The current enthusiasm for artificial intelligence, a fever dream largely confined to Californian garages and venture capital boardrooms, has predictably inflated certain share prices. Nvidia, naturally, has benefited, as has the Google behemoth. Even Palantir, a name redolent of espionage and dubious contracts, has enjoyed a temporary reprieve from obscurity. But these are mere trinkets compared to the quiet ascent of Micron Technology.

Micron, a manufacturer of memory chips – a commodity scarcely more glamorous than gravel – has, over the past twelve months, appreciated by a rather startling 260%. One begins to suspect a clerical error, or perhaps a coordinated campaign of irrational exuberance. Yet, the figures, alas, are correct.

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The Age of Forgetfulness

The notion that intelligence can be artificially created is, of course, preposterous. But the demand for ever-increasing computational power is undeniably real, and this, rather than any genuine innovation, is driving the current frenzy. The AI isn’t merely confined to server farms; it’s creeping into smartphones, automobiles, and, one shudders to think, spectacles. All of this requires memory – and not just any memory, but the increasingly sophisticated High-Bandwidth Memory, or HBM, as the engineers call it.

Sanjay Mehrotra, Micron’s Chief Executive, recently remarked, with the bland optimism characteristic of his profession, that AI-driven demand is “accelerating.” One suspects he merely states the obvious. The real point, however, is that these large language models – these digital parrots, endlessly repeating what they have been taught – require ever-expanding ‘context windows.’ The more they attempt to mimic intelligence, the more memory they consume. It is a rather fitting irony.

As Mehrotra further elucidated, memory is no longer a mere component, but a ‘strategic asset.’ A rather grandiose pronouncement, perhaps, but not entirely inaccurate. In the current climate, the ability to store and process information is, effectively, power.

The Law of Diminishing Returns (and Supply)

Micron projects that the market for HBM will expand from a respectable $35 billion to a rather astonishing $100 billion by 2028. A compound annual growth rate of 40% is, to put it mildly, ambitious. One might even suggest it is unsustainable. However, the more pressing concern is not whether the market will grow, but whether the supply will keep pace.

Mehrotra, with a candor unusual in corporate pronouncements, admits that supply constraints will likely persist ‘beyond calendar 2026.’ In other words, the company anticipates a period of considerable profit, driven not by innovation, but by simple scarcity. A familiar tale, indeed.

The imbalance between supply and demand, he suggests, will be ‘substantial’ and ‘foreseeable.’ One suspects he is not unduly distressed by this prospect. The company, predictably, anticipates robust demand not only from the AI sector, but also from aerospace, defense, and, rather vaguely, ‘video surveillance.’ The modern world, it seems, is increasingly preoccupied with monitoring itself.

Anyone with a passing acquaintance with economics will appreciate that limited supply and strong demand lead to higher prices. Micron, therefore, stands to benefit handsomely. William Blair’s analyst, Sebastien Naji, anticipates that the company’s earnings could quadruple over the next two years. A rather optimistic forecast, perhaps, but not entirely implausible.

Share prices, of course, tend to follow earnings. Micron’s stock, therefore, has room for further appreciation. Importantly, this potential growth is not yet fully priced in. The company trades at a modest 12.5 times forward earnings, with a Price/Earnings to Growth (PEG) ratio of a mere 0.7. A rare and increasingly elusive combination.

A Touch of Skepticism

One might expect an AI stock with such promising prospects to be universally lauded on Wall Street. Surprisingly, this is not the case. Thirty-seven of the forty-three analysts surveyed by S&P Global in January rated the stock as a ‘buy’ or ‘strong buy.’ However, the consensus twelve-month price target is a rather disconcerting 12% below the current share price.

This bearish outlook could simply reflect the speed with which Micron’s share price has risen. Analysts, one suspects, are struggling to keep pace with the revised fundamentals. Alternatively, it could indicate deeper concerns – perhaps that a rival, such as Samsung, could capture a significant share of the HBM market. The spectre of Korean competition, naturally, looms large.

Whatever the reason for the low price target, one should not be deterred by the views of Wall Street. The future, despite the inherent absurdity of the underlying technology, remains bright for this high-flying stock. It is, after all, a simple matter of supply and demand. And in the current climate, scarcity is a most valuable commodity.

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2026-01-26 11:53