The market views Micron Technologies through outdated cycle assumptions, even as memory becomes a strategic input rather than a commodity output. But sixty eight percent margins are not a peak. They are a price tag on scarcity. As the memory wall becomes the final bottleneck for AI, Micron transformed from chipmaker to toll booth. Sold out through 2026. Trading at seven point six times forward earnings. The cycle ended. The transformation began.
What is HBM and why does AI need it?
High Bandwidth Memory is not just faster RAM. It is memory stacked vertically, eight to twelve layers high, connected by thousands of tiny wires. Traditional memory sits on a separate chip and forces data to travel back and forth across a circuit board, creating delay. HBM sits directly next to the processor in the same package, dramatically reducing that distance and changing performance. Modern AI chips require it. NVIDIA's H100 uses six HBM stacks, the B200 uses eight, AMD's MI300X uses eight, and Google's TPU relies on HBM as well. Broadcom's custom chips for Google, Meta, and OpenAI integrate up to twelve HBM stacks, more than any NVIDIA design. Every major AI chip, for training or inference, now depends on HBM. This demand is not optional. It is architectural.
How did MU stock gross margins triple in eighteen months?
In 2024, Micron's gross margin sat at twenty two percent. By Q2 fiscal 2026, guidance points to sixty eight percent. That is not a recovery. That is a business model shift. Data center revenue now accounts for 56% of total sales, up from under thirty percent two years ago. HBM revenue hit ten billion dollars in fiscal 2025, up fivefold from the prior year. The mix shifted from commodity memory to AI infrastructure.
Why is the 68% margin an energy efficiency premium?
Moving data from memory to processor consumes one hundred times more energy than the computation itself. HBM does not just provide speed. It provides energy efficiency. In a world where AI data centers hit power grid limits, Micron's margin is a power efficiency premium. Every HBM chip consumes three times the wafer capacity of DDR5. Micron wins twice: high margins on AI, rising prices on constrained consumer supply.
Why does HBM4 make Micron a co-designer, not a vendor?
HBM4 moves the base logic die to a foundry process like TSMC five nanometer. Micron becomes a co-designer with NVIDIA, not just a parts supplier. You do not price a critical co-designer at 7.6x forward earnings. SK Hynix holds sixty two percent market share. Micron holds twenty one percent and rising. Samsung trails at seventeen percent with yield challenges. The complexity compounds with each generation.
Why are hyperscalers locking in multi-year agreements?
The alternative is waiting in line. Supply constraints are structural, not temporary. The HBM TAM is projected to reach $100 billion by 2028, nearly tripling from thirty five billion in 2025. Every major cloud provider is securing capacity years in advance. When scarcity is the strategy, long-term contracts become the currency.
Micron did not just ride the AI wave. It repositioned from commodity supplier to infrastructure partner. The sixty eight percent margin is not a peak to fade. It is a signal that memory crossed from cyclical to structural. Understanding that shift separates investors who see a trade from investors who see a transformation. The memory wall became the advantage.