Micron revenue surges 196% on AI demand, yet valuation remains discounted
Shares have climbed 214% year-to-date, outpacing Nvidia, but a forward P/E of 7.6 reflects lingering investor caution over the sector’s cyclical history.
Micron Technology reported a 196 per cent year-on-year increase in revenue to $23.9 billion for its fiscal 2026 second quarter ending 26 February. The result was driven by a severe shortage of high-bandwidth memory (HBM) for generative artificial intelligence data centres, which has exceeded current supply capacity and allowed the company to substantially raise prices.
The company’s shares have risen 214 per cent year-to-date, significantly outperforming peers such as Nvidia, which gained 14 per cent over the same period. This surge reflects market optimism that access to sufficient HBM has become a primary constraint for developing advanced AI models, creating intense demand for Micron’s products alongside those of competitors like SK Hynix and Samsung.
Looking ahead, Micron expects its gross margin to reach 81 per cent in the next quarter. Earnings per share are projected to jump approximately tenfold year-on-year to $19.15 at the midpoint. The demand for HBM is so robust that it is absorbing production capacity that would otherwise have been allocated to automotive and mobile memory segments, boosting margins across the board.
Despite this strong operating momentum, Micron’s forward price-to-earnings multiple remains low at 7.6. This represents a dramatic discount to the Nasdaq’s average estimate of 26 and Nvidia’s forward P/E of 24. The valuation suggests the market remains unconvinced that Micron can break out of the boom-and-bust cycles that have historically defined the memory hardware industry.
Memory is a highly commoditised product, meaning there is little differentiation between chips produced by Micron and its rivals. Historically, sharp increases in demand have led producers to race to ramp up output, resulting in supply gluts and price slumps. Micron plans to invest $200 billion in new US production capacity, a move that investors view as likely to eventually cause supply to catch up with and exceed demand.
While a massive crash in the stock price appears unlikely given the current valuation, the company remains dependent on the long-term viability of the generative AI sector. Investors are weighing the immediate profitability of the AI boom against the risk that future capacity expansion will erode the pricing power that is currently driving Micron’s results.
