Summary
Highlights
Micron Technology is a top manufacturer of memory chips, including DRAM, flash memory, and High Bandwidth Memory (HBM). HBM is vital for AI training and machine learning due to the increasing demand for faster and larger memory access. HBM stacks memory chips to move vast amounts of data at high speeds with greater power efficiency, making it highly sought after in data centers. Micron's HBM product category is its fastest-growing, with demand exceeding supply through 2026.
Micron's HBM3 memory is used in Nvidia's H200s and B200 GPUs, AMD's Instinct accelerators, and Google's TPUs, as well as Microsoft's Azure AI infrastructure. Micron also supplies HBM4 memory for upcoming AI accelerators from Nvidia and AMD in 2026. The company holds a 21% share of the global HBM market, making it one of three dominant players and the only US-based one, potentially benefiting from fewer supply chain issues and tariffs. The AI memory chip market is projected to grow ninefold over the next nine years, at a compound annual growth rate exceeding 27% through 2034. Micron's market share in HBM has increased fivefold in the last year, from 4% to 21%.
Beyond AI applications, Micron provides memory and data storage products for various industries, including laptops, smartphones, factory robots, self-driving cars, and medical equipment. This diverse portfolio makes Micron a strong performer regardless of which GPU maker or consumer electronics company comes out on top.
Micron reported record revenues of $11.3 billion for the quarter, a 46% year-over-year increase, and $37.4 billion for the fiscal year, up 49% year-over-year. Earnings per share rose by 258% to $2.83. DRAM, heavily influenced by HBM, accounts for over 75% of Micron's total revenues. Their cloud memory business unit, a key driver of AI revolution, saw revenue grow from $1.45 billion to $4.5 billion, a 214% increase year-over-year, becoming their largest business unit. This growth highlights Micron's effective strategy in rapidly expanding markets.
Micron faces competition from SK Hynix (dominant with 62% market share) and Samsung, which recently had HBM chip qualification delays, allowing Micron to gain market share. However, Samsung's increased production could lead to an oversupply, potentially forcing price reductions. Manufacturing risks also exist, particularly with the complexity of scaling HBM4 production, as seen with Samsung's previous issues. Geopolitical factors, such as trade restrictions with China, could affect Micron's market access or supply chain. Despite these risks, Micron's status as a US company makes it less vulnerable to geopolitical issues compared to its South Korean competitors. Micron's rapid revenue and earnings growth suggest it is undervalued, with a fair price-to-earnings ratio around 34 compared to its current 21, and a forward P/E of 10, lower than other chip companies. The speaker plans to increase investment in Micron stock due to its strong performance and growth prospects.