Micron: The new Nvidia in the US memory market?
Wall Street is keeping a close eye on Micron, the memory chip manufacturer based in Boise, Idaho. And for good reason. The company briefly surpassed the market value of giants like Meta and Tesla. This surge is all thanks to the booming demand for memory chips driven by artificial intelligence. The question is: will this enthusiasm last?
Micron has been preparing for the long term, ensuring it is ready to face a sudden drop in demand or an oversupply. Last Friday, the company closed the trading session with a market value close to $1.27 trillion. Meanwhile, Meta was at $1.39 trillion and Tesla at $1.42 trillion. Micron's stock price soared over 236% in the last month, closing at $1,132 per share. For those who remember when the company sold small memory cards for PCs and smartphones, this is a dizzying rise.
The chip shortage and "RAMageddon"
What is happening is that Micron is riding the wave of growth in AI-powered data centers. This has created a shortage of memory chips, such as DRAM and NAND, which the company manufactures, especially High-Bandwidth Memory (HBM). A single AI server requires much more memory than a laptop. Companies like Nvidia, Microsoft, Amazon AWS, Google, Meta, and Oracle are buying large quantities of these chips. This is forcing other companies, from PC manufacturers like Dell and HP to other types of device manufacturers, to stock up on memory as well.
This lack of supply, dubbed "RAMageddon," is expected to continue until 2027. It is already driving up the prices of consumer electronics, such as Apple products and Xbox consoles. With the tech industry clamoring for more memory, Micron reported impressive financial results in the third quarter. Revenue quadrupled compared to the previous year, reaching $41.45 billion, and profits soared to $28.2 billion in the same period.
Micron's long-term strategy
The big question for memory chip manufacturers like Micron and Samsung has always been the time and cost involved in building new manufacturing facilities to increase capacity. Often, demand drops as soon as companies manage to increase capacity, creating an oversupply and subsequent price drop. But Micron has gotten ahead by emphasizing a series of long-term supply agreements, including with Nvidia and the AI lab Anthropic, which presumably would protect it.
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