Is this a stronger business model—or simply another peak in a brutal cycle? In the AI era, memory has become a strategic asset.
Whenever investors talk about artificial intelligence, the conversation usually starts with the glamorous parts: the chips doing the calculations, the models answering questions and the data centres rising from the ground.
Memory rarely gets the same attention.
Yet an AI system without enough fast memory is rather like a brilliant chef working on a tiny kitchen counter. The talent is there, but everything slows down because there is nowhere to put the ingredients.
That is where Micron Technology comes in.
The company makes memory and storage chips that allow computers to hold, move and retrieve data at speed. Its products are used in AI servers, smartphones, computers, cars and industrial equipment.
Micron began in 1978 with four people working in the basement of a dental office in Boise, Idaho. Today, it is one of three dominant global memory producers, alongside Samsung and SK Hynix, with more than 60,000 lifetime patents.
Not bad for a business born beneath a dentist’s chair.
Why Memory Suddenly Matters
The investment case is straightforward: AI needs memory—and lots of it.
Every new generation of powerful AI processors requires more high-bandwidth memory to keep data flowing. Without it, even the most advanced chip can spend much of its time waiting.
Imagine buying a Ferrari and discovering that the only road available is a narrow country lane. The engine may be impressive, but the journey will still be slow.
High-bandwidth memory helps widen that road.
And because demand is growing faster than supply, Micron has found itself in an unusually attractive position.
In its third quarter of fiscal 2026, revenue reached $41.46 billion, compared with $9.30 billion a year earlier. Gross margins climbed to roughly 85%—figures that look more like those of a highly successful software company than a manufacturer operating expensive semiconductor factories.
Customers are also putting real money on the table. Micron expects approximately $22 billion in customer deposits and related financing commitments, including around $18 billion in cash deposits.
That is significant.
When customers are willing to help fund your factories just to secure future supply, you are no longer selling something they consider easily replaceable.
A Different Kind of Moat
Micron’s competitive advantage is not the same as Apple’s brand or Microsoft’s software ecosystem.
Its moat comes from manufacturing expertise, advanced technology, patents and the enormous cost of building modern semiconductor facilities.
Only a handful of companies can produce cutting-edge memory at scale. New factories take years to build, and advanced packaging creates additional bottlenecks.
This makes the memory market more concentrated than it once was.
Long-term customer agreements, minimum purchase commitments and pricing floors could also make Micron’s business more predictable than during previous cycles.
But the important word here is could.
The Catch: Capitalism Notices High Margins
There is an old investing saying: when everyone is rushing to dig for gold, sell the picks and shovels.
Micron certainly supplies an essential shovel for the AI gold rush.
The problem is that it also owns the steel mill—and the mill needs rebuilding every few years at enormous cost.
Micron expects to spend approximately $27 billion on capital expenditure in fiscal 2026.
Those investments are necessary to expand capacity and keep pace with new technology. But they also highlight why Micron is not the kind of business that can grow effortlessly without constantly reinvesting.
When memory prices rise, profits can surge.
When prices fall, the same operating leverage works in reverse.
History offers a useful reminder. During periods of high oil prices, people confidently predicted “the end of cheap oil.” Eventually, those high prices attracted new investment, technological innovation and additional supply.
Scarcity is profitable—but it is also an invitation.
Samsung and SK Hynix remain formidable competitors. Chinese companies are improving. Better algorithms and more efficient AI processors could eventually reduce how much memory is needed for each unit of computing power.
And then there is geopolitics.
Micron sits at the intersection of American industrial policy, Chinese restrictions, export controls and Taiwan’s importance to global semiconductor production.
Government support through the US CHIPS Act helps, but it does not eliminate the risks of being a critical supplier in a technological cold war.
What Investors Are Really Betting On
Micron is not a classic founder-led quality compounder.
Its earnings are less predictable than those of a strong software company, and memory remains a cyclical industry with a long history of dramatic booms and painful busts.
But dismissing Micron as simply another commodity producer may also miss what is changing.
AI is creating genuinely new demand. The industry is more concentrated. Customers are committing billions of dollars in advance. And the memory required by modern AI systems is becoming increasingly sophisticated.
For me, that is what makes the story interesting.
Micron may be evolving from a business that merely rides the cycle into one with stronger customer relationships, greater pricing power and a more important strategic position.
Or it may simply be enjoying an exceptionally powerful moment before the familiar forces of competition and supply catch up.
The question is not whether AI needs memory. It clearly does. Elon Musk recently said memory production is growing roughly 20% a year, while demand may be climbing closer to 200% a year, so there is a huge mismatch here.
The question is whether this unusual period of scarcity will give Micron enough time to build something more durable—or whether, as so often happens in investing, the future will turn out to be another version of the past.
Awet Ghirmay, Head of Investment Research
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