Memory specialist Micron Technology (MU -0.44%) trades near $878 as of this writing, at about 20 times its trailing earnings but only about 6 times the earnings analysts expect over the coming year. Earnings are climbing so fast that next year's expected number dwarfs the trailing one. And the market is paying about 6 times for it because it assumes the good times end soon.
Memory has always worked that way: High prices attract new supply, and new supply ends the boom.
But last Friday, the supply that is supposed to end this one got a price tag and a schedule. SK Hynix committed about $38 billion to two new fabs -- and the first of them doesn't open a clean room until December 2028.
Image source: Micron.
A boom still accelerating The earnings the market is discounting are not hypothetical. In its fiscal third quarter (ended May 28, 2026), Micron's revenue more than quadrupled year over year to $41.5 billion, up from $23.9 billion just one quarter earlier. Gross margin ran 84.6%, compared to 74.4% in fiscal Q2 and 37.7% a year ago. Operating cash flow, meanwhile, more than quintupled year over year to $25.4 billion.
Management expects more. Guidance calls for fiscal fourth-quarter revenue of about $50 billion, gross margin of about 86%, and earnings per share of about $30.73.
Annualize that guided quarter alone and the stock trades at about 7 times earnings.
Data center demand is driving all of it. Micron's data center revenue exceeded $25 billion in fiscal Q3 (more than $100 billion annualized).
And in prepared remarks for its June earnings call, the company said industry demand for DRAM and NAND "continues to significantly exceed industry supply."
The supply response now has a date For a memory stock, what matters is when supply arrives. On Friday, SK Hynix's board approved 54 trillion won (about $38 billion) for the two new fabs. The bigger piece, 35.2 trillion won, goes to a DRAM plant in Yongin, South Korea, called Y2. The rest, 19.1 trillion won, funds a NAND plant in Cheongju called M17.
I'd argue the schedule matters more than the dollar figure. M17 breaks ground in February 2027 and opens its first clean room in December 2028. Y2 doesn't break ground until July 2027, and its first clean room opens in June 2029.
And a first clean room typically marks the start of equipping a fab, not the start of volume output. Capacity decided on today, in other words, is 2028-and-beyond capacity.
That squares with what Micron itself has been saying. In the same June remarks, Micron said it expects tight conditions "to persist beyond calendar 2027 as a result of AI-driven demand across all segments coupled with structural supply constraints."
Of course, some new supply lands sooner. SK Hynix's first Yongin fab, already under construction, is slated to open its first clean room in February 2027. Micron itself is spending at record levels, too ($7.1 billion of capital expenditures in fiscal Q3 alone).
However, even with all of that in motion, Micron still expects tightness through 2027. The fabs approved last week arrive after that.
Contracts built for the turn Micron has also spent this boom locking in what happens when it ends. The company has signed 16 strategic customer agreements -- take-or-pay contracts, meaning customers commit to buying specific volumes over multiple years. The agreements typically run five years, from calendar 2026 through the end of calendar 2030.
Together, they cover roughly 20% of Micron's DRAM volume and about a third of its NAND volume over that period. Management expects half or more of company revenue to eventually fall under these agreements.
The largest of them generally carry price ceilings set at calendar second-quarter 2026 market prices, with price floors that hold through the term. In a downturn, those floors should put a boundary under how far Micron's contracted revenue can fall.
CEO Sanjay Mehrotra said in the June earnings release that these agreements "will significantly enhance the durability and predictability of Micron's strong financial performance."
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Ultimately, the cycle will still turn. Memory cycles always have, and record prices are financing the capacity that could end this one. But at a valuation of about 6 times expected earnings, the stock is priced as if that ending is close.
The construction schedules the industry itself has published put the big additions in 2028 and 2029, and Micron's contracts run through 2030. To me, the business looks likely to keep earning at something like this pace longer than the market is paying for.
The main risk isn't the construction schedule -- memory prices could fall without a single new fab opening if artificial intelligence (AI) demand cools. But based on what the industry has committed to build, the turn arguably sits further away than the price assumes.
Micron Technology, Inc. (NASDAQ:MU) stock gained about 1% in Monday premarket trading as technology stocks moved higher ahead of the opening bell. Nasdaq futures rose 0.41%, while S&P 500 futures gained 0.17%.
The move comes as investors weigh Micron’s longer-term growth prospects against expectations for slowing memory pricing momentum and rising competition from Chinese manufacturers.
On Aug. 7, Citigroup analyst Atif Malik maintained a Buy rating on Micron but lowered his price forecast to $1,150 from $1,400. The firm expects memory pricing momentum to slow over the next year, even as DRAM and NAND prices continue to rise from current levels.
Citi Trims Micron ForecastCiti reduced its valuation multiple and lowered its fiscal 2027 and 2028 earnings estimates.
The firm expects DRAM and NAND prices to continue climbing but sees the pace of gains slowing over the next four quarters. Citi expects memory prices to peak in the second quarter of next year.
The more cautious outlook reflects concerns that the current memory upcycle could lose momentum as supply expands and pricing growth moderates.
China Competition Remains Key RiskCiti identified rising Chinese memory capacity as the biggest long-term risk to its Micron thesis.
The firm said additional NAND and DRAM supply from China could pressure Micron’s pricing power outside the U.S., even if American restrictions limit the Chinese companies’ access to the U.S. market.
Despite those risks, another market strategist sees substantial upside remaining in Micron as the memory cycle progresses.
Parker Sees Micron Doubling By Cycle EndTrivariate Research CEO Adam Parker told CNBC on Friday that Micron, NVIDIA Corp. (NASDAQ:NVDA) and other compute-related stocks could trade meaningfully higher over the next 12 months. However, he expects the group to advance in a steadier grind rather than through another sharp rally.
Parker said Micron could double by the end of the cycle because investors may already be pricing in too much earnings deterioration after the eventual peak.
He also argued that investors are focusing too heavily on Micron’s income statement and not enough on its improving balance sheet. Parker pointed to the company’s revenue outlook, high gross margins and potential to generate substantial free cash flow over the next several years.
Still, Parker said investors should manage their exposure to AI semiconductor stocks through broader diversification because volatility remains elevated.
Earnings And Analyst OutlookMicron’s next major scheduled catalyst is its earnings report, estimated for Sept. 22, 2026.
Analysts expect earnings of $31.29 per share, up sharply from $3.03 a year earlier. Revenue is estimated at $50.82 billion, compared with $11.31 billion in the year-ago period.
Micron trades at a price-to-earnings ratio of about 19.8.
Top ETF ExposureMicron also carries significant weight in several technology and semiconductor exchange-traded funds.
Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ): 8.91% State Street SPDR NYSE Technology ETF (NYSE:XNTK): 8.75% Invesco AI and Next Gen Software ETF (NYSE:IGPT): 8.71% Micron’s sizable weighting means significant inflows or outflows from these ETFs can contribute to buying or selling pressure in the stock.
Price ActionMU Stock Price Activity: Micron Technology shares were down 0.06% at $877.07 during premarket trading on Monday, according to Benzinga Pro data.
Photo via Shutterstock
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Micron Technology has endured one of its most volatile periods in years, with investors questioning whether the AI-driven memory boom can sustain the chipmaker's record earnings.
Although the stock has rebounded 12% over the past five trading sessions, it remains roughly 30% below its all-time high of $1,255 reached on June 25 following the company's fiscal third-quarter earnings report.
Shares closed Friday at $877.57 after suffering a 29% decline in July, marking their worst monthly performance since June 2015.
The steep retreat has reignited debate over whether Micron's correction presents an attractive buying opportunity or reflects mounting concerns that the AI memory supercycle is beginning to lose momentum.
Micron's recent selloff has not been driven by deteriorating business fundamentals.
The company continues to benefit from unprecedented demand for high-bandwidth memory (HBM) chips used in artificial intelligence servers, while earnings remain near record levels.
Instead, investors have become increasingly concerned about how long current industry conditions can persist.
Following months of rapid gains, Micron's valuation had begun pricing in several years of elevated memory prices, expanding profit margins and sustained AI spending.
Those expectations have come under pressure as concerns grow over rising industry capital expenditure, additional manufacturing capacity and intensifying competition from Chinese memory producers.
The broader AI trade also experienced heightened volatility throughout July as investors reassessed whether hyperscale cloud companies could continue spending aggressively on AI infrastructure.
Despite the sharp decline, some investors argue that the market has become overly pessimistic.
James Foord, investment manager at Five Arrows and one of TipRanks' top-ranked stock experts, believes Micron now offers an attractive risk-reward profile.
According to TipRanks, Foord believes "the stock is now too cheap to ignore," citing the company's improving balance sheet and robust cash generation.
A key pillar of his investment case is Micron's growing ability to return cash to shareholders.
Management has indicated that it intends to accelerate capital returns, while Foord estimates the company could theoretically repurchase between 8% and 19% of its outstanding shares over the next two years.
While acknowledging that such projections remain speculative because significant buybacks would likely affect the share price itself, Foord argues that the company's financial strength gives it considerable flexibility.
"Micron has so much to give back to investors that it makes the stock really attractive," he said.
Perhaps more importantly, Foord argues that investors do not need today's extraordinary memory conditions to persist indefinitely for the investment thesis to remain compelling.
Under what he describes as a conservative scenario, which assumes meaningful margin compression and no recovery in Micron's valuation multiple, the company could still retire more than 8% of its shares while trading at roughly 14.5 times projected fiscal 2028 earnings.
That would leave Micron trading below its historical valuation despite assuming substantially weaker profitability than current levels.
"The current price is pretty much pricing in the worst-case scenario," Foord said.
Although he acknowledges that expanding industry capacity, increased Chinese competition and weaker memory pricing could pressure profitability over time, he believes much of that downside is already reflected in today's valuation.
"The stock really can't go much lower at this point," he argued, adding that stronger-than-expected memory conditions could produce considerably better returns.
Foord ultimately concludes that investors can "buy Micron now with little downside risk."
Citi trims target but remains bullishWall Street has also become more cautious on the pace of future memory pricing while maintaining a constructive long-term view.
Citi on Friday lowered its price target on Micron shares to $1,150 from $1,400 while reiterating its Buy rating, citing mixed earnings from memory peers SanDisk and Western Digital and expectations for moderating DRAM and NAND pricing next year.
"We trim MU TP to $1,150 from $1,400 based on 8x P/E vs prior 10x times revised C27 EPS to reflect lower market multiples on mixed memory peer results," the analyst wrote.
The revision followed meetings with supply-chain participants and industry experts during the Future of Memory and Storage conference.
While Citi continues to expect both DRAM and NAND prices to rise, it believes the pace of gains will gradually slow.
"We see both DRAM and NAND prices decelerating Q/Q in the next four quarters with prices peaking in Q2 of next year," the analyst said.
Because memory stocks tend to trade on expectations for future pricing rather than current profitability, investors remain highly sensitive to any signs that pricing momentum could weaken.
KeyBanc event may provide stock catalyst as analysts remain bullishDespite July's sharp correction, analyst sentiment toward Micron remains overwhelmingly positive.
According to Wall Street consensus estimates, 29 of 30 analysts covering the company currently recommend buying the stock, with only one maintaining a Hold rating.
That gives Micron a Strong Buy consensus, while the average price target stands at $1,560.74, implying roughly 78% upside from Friday's closing price.
Near-term catalysts could also influence investor sentiment.
Micron management is scheduled to present at the KeyBanc Capital Markets Technology Leadership Forum today.
"Last year management raised guidance at this forum, and the stock popped 7.2%," a trader on Stocktwits noted, suggesting Micron shares could climb toward $950 if management strikes an optimistic tone.
Earlier in July, KeyBanc analyst John Vinh also reaffirmed his bullish stance by increasing his price target on Micron to $1,750 from $1,600, reflecting continued confidence in the company's position within the AI memory market despite recent volatility.
Micron Technology (NASDAQ:MU | MU Price Prediction) and Intel (NASDAQ:INTC) both closed blockbuster quarters, yet the businesses behind those headlines differ sharply.
Micron Technology (MU -0.44%) has had an odd year. It started off red-hot, and then, as soon as the calendar flipped to July, investors couldn't sell Micron stock fast enough. At its worst, it was down nearly 40% from its all-time high; now it's around 30% off. That quick bounceback may have defined a low point for the stock, but I think there's far more upside than downside ahead, at least in the near future.
Micron still has a ton of momentum in the memory chip market, and I think it could be worth a lot more by this time next year. How much more? Let's take a look.
Image source: The Motley Fool.
Micron is in the midst of a generational boom Micron makes memory chips, fabricating both primary varieties: NAND and DRAM. Micron and its peers weren't ready for the massive wave of AI demand, and, with a lack of supply, prices rose. This boosted Micron's revenue and profits rapidly, and made it one of the hottest stocks on the market. However, investors worry that this trend will eventually reverse, causing Micron's newfound revenue and profits to plummet. While this sentiment is right, the question is how long this will take.
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Most projections show that the build-out of AI data centers will continue through 2030, but depending on how widespread AI usage becomes, it could last far beyond that. This could create a multiyear boom in memory chip prices, and Micron's management team believes it will last for the foreseeable future. In its latest financial results, Micron informed investors that it expects the memory chip market to remain tight beyond 2027. That's a long time, and I think it could lead to soaring stock prices.
Historically, Micron's price-to-earnings (P/E) ratio has fluctuated alongside demand for memory chips. While there were some incredible spikes, the long-term average valuation for Micron is 20.2 times earnings.
MU PE Ratio data by YCharts
Wall Street's consensus projection for Micron's fiscal year 2027 (ending August 2027) is $155.56 in earnings per share. Should Micron hit Wall Street's target and achieve a 20 times earnings multiple, that would price the stock at over $3,100 per share. That's simply an incredible return compared to today's $800 stock price and could transform a $5,000 investment today into over $19,000.
Even if the valuation figure is wrong and Micron trades at 10 times earnings, that's still a $1,555 stock -- about a double from today's levels. That indicates that Micron is a strong buy at today's levels, as there's a lot of evidence that the memory chip market will stay strong over the next year or so, and Micron is positioned to capitalize.
Arista Wealth Management LLC reduced its stake in Micron Technology, Inc. (NASDAQ:MU – Free Report) by 27.0% in the 2nd quarter, according to the company in its most recent disclosure with the Securities and Exchange Commission. The institutional investor owned 2,989 shares of the semiconductor manufacturer’s stock after selling 1,104 shares during the period. Arista Wealth Management LLC’s holdings in Micron Technology were worth $3,450,000 as of its most recent SEC filing.
Several other institutional investors have also recently made changes to their positions in MU. Brighton Jones LLC grew its stake in shares of Micron Technology by 18.3% in the 4th quarter. Brighton Jones LLC now owns 6,318 shares of the semiconductor manufacturer’s stock valued at $532,000 after buying an additional 976 shares during the period. Sivia Capital Partners LLC boosted its holdings in Micron Technology by 21.7% in the second quarter. Sivia Capital Partners LLC now owns 3,528 shares of the semiconductor manufacturer’s stock worth $435,000 after acquiring an additional 628 shares in the last quarter. United Bank acquired a new stake in Micron Technology in the second quarter valued at approximately $236,000. Schnieders Capital Management LLC. grew its stake in Micron Technology by 67.9% in the second quarter. Schnieders Capital Management LLC. now owns 16,984 shares of the semiconductor manufacturer’s stock valued at $2,093,000 after acquiring an additional 6,867 shares during the period. Finally, Sei Investments Co. increased its holdings in shares of Micron Technology by 5.6% during the second quarter. Sei Investments Co. now owns 405,545 shares of the semiconductor manufacturer’s stock valued at $49,987,000 after acquiring an additional 21,619 shares in the last quarter. Institutional investors and hedge funds own 80.84% of the company’s stock.
Key Micron Technology News Here are the key news stories impacting Micron Technology this week:
Positive Sentiment: Citigroup lowered its price target to $1,150 from $1,400 but maintained a Buy rating, implying roughly 31% upside from the referenced price. The target cut reflects a more cautious outlook, but the continued Buy rating signals confidence in Micron’s earnings potential. Benzinga price target report Positive Sentiment: Micron’s latest quarterly results remain a major fundamental support: revenue rose 345.8% year over year to $41.46 billion, adjusted EPS reached $25.11, and fourth-quarter guidance calls for approximately $50 billion in revenue and about $31 in adjusted EPS. The company also disclosed 16 strategic customer agreements extending through 2030, several with pricing floors or bands that could provide more stable revenue and margins. Micron long-term AI memory contracts Positive Sentiment: Ongoing AI data-center expansion is supporting demand for high-bandwidth memory, while higher memory costs are contributing to increased capital spending by major cloud customers. This reinforces the view that Micron’s premium AI-memory products remain supply constrained. Amazon memory costs and capital spending Neutral Sentiment: SK Hynix approved approximately $38 billion for two new South Korean memory fabs. The investment highlights strong industry demand, but investors are concerned that additional supply could eventually pressure pricing and reduce Micron’s exceptional margins. SK Hynix new memory fabs Negative Sentiment: Fresh commentary from Citi points to a more cautious memory-pricing outlook, while weaker-than-expected outlooks from SanDisk and Western Digital have triggered a broader memory-stock selloff. Investors are increasingly focused on whether today’s AI-related shortage will lead to oversupply in future years. Why Micron stock is falling Negative Sentiment: Reports that Nvidia is considering lower-memory versions of future Rubin Ultra GPUs raise concerns that customers could reduce high-bandwidth memory content per system, potentially limiting long-term HBM growth. Nvidia Rubin Ultra memory report Wall Street Analysts Forecast Growth MU has been the topic of a number of research reports. Cantor Fitzgerald reaffirmed an “overweight” rating and set a $1,500.00 target price on shares of Micron Technology in a research report on Thursday, June 25th. Citigroup decreased their price target on shares of Micron Technology from $1,400.00 to $1,150.00 and set a “buy” rating for the company in a research note on Friday. Deutsche Bank Aktiengesellschaft upped their price objective on shares of Micron Technology from $1,500.00 to $1,550.00 and gave the stock a “buy” rating in a report on Thursday, June 25th. Raymond James Financial raised their price objective on shares of Micron Technology from $1,100.00 to $1,500.00 and gave the company an “outperform” rating in a research note on Thursday, June 25th. Finally, Wells Fargo & Company lifted their price objective on shares of Micron Technology from $1,220.00 to $1,525.00 and gave the company an “overweight” rating in a report on Thursday, June 25th. Four investment analysts have rated the stock with a Strong Buy rating, thirty-one have issued a Buy rating and three have assigned a Hold rating to the company’s stock. According to MarketBeat.com, the stock has an average rating of “Buy” and an average price target of $1,260.31.
Check Out Our Latest Analysis on Micron Technology
Insiders Place Their Bets In other Micron Technology news, Director Steven J. Gomo sold 2,000 shares of Micron Technology stock in a transaction that occurred on Monday, May 11th. The shares were sold at an average price of $787.03, for a total transaction of $1,574,060.00. Following the transaction, the director owned 17,139 shares of the company’s stock, valued at $13,488,907.17. This trade represents a 10.45% decrease in their position. The transaction was disclosed in a filing with the Securities & Exchange Commission, which is available through the SEC website. Also, Director Lynn A. Dugle sold 1,300 shares of Micron Technology stock in a transaction that occurred on Tuesday, June 30th. The stock was sold at an average price of $1,150.43, for a total transaction of $1,495,559.00. Following the transaction, the director directly owned 17,728 shares in the company, valued at approximately $20,394,823.04. This represents a 6.83% decrease in their position. The SEC filing for this sale provides additional information. Insiders sold a total of 164,179 shares of company stock worth $169,385,921 in the last ninety days. 0.24% of the stock is owned by corporate insiders.
Micron Technology Price Performance Shares of NASDAQ:MU opened at $877.57 on Friday. The company has a current ratio of 3.42, a quick ratio of 2.98 and a debt-to-equity ratio of 0.05. The stock’s fifty day simple moving average is $975.03 and its two-hundred day simple moving average is $658.56. Micron Technology, Inc. has a 1-year low of $111.67 and a 1-year high of $1,255.00. The stock has a market cap of $991.12 billion, a PE ratio of 19.87 and a beta of 2.18.
Micron Technology (NASDAQ:MU – Get Free Report) last posted its earnings results on Wednesday, June 24th. The semiconductor manufacturer reported $25.11 earnings per share (EPS) for the quarter, topping the consensus estimate of $21.39 by $3.72. The firm had revenue of $41.46 billion during the quarter, compared to analyst estimates of $35.91 billion. Micron Technology had a net margin of 55.91% and a return on equity of 71.13%. The business’s revenue was up 345.8% compared to the same quarter last year. During the same quarter in the prior year, the business posted $1.91 EPS. Micron Technology has set its Q4 2026 guidance at 30.000-32.000 EPS. As a group, analysts forecast that Micron Technology, Inc. will post 72.93 EPS for the current fiscal year.
Micron Technology Dividend Announcement The company also recently declared a quarterly dividend, which was paid on Tuesday, July 21st. Investors of record on Monday, July 6th were issued a dividend of $0.15 per share. The ex-dividend date was Monday, July 6th. This represents a $0.60 annualized dividend and a yield of 0.1%. Micron Technology’s payout ratio is 1.36%.
About Micron Technology (Free Report)
Micron Technology, Inc is a global semiconductor company that designs and manufactures memory and storage solutions. Its product portfolio includes dynamic random-access memory (DRAM), NAND flash memory, solid-state drives (SSDs), memory modules and embedded memory solutions for a wide range of computing and electronic devices. Micron supplies components used in data centers, enterprise and cloud infrastructure, client computing, mobile devices, automotive systems and industrial applications, and also markets consumer-facing products under the Crucial brand.
Founded in 1978 and headquartered in Boise, Idaho, Micron has grown into an international manufacturer with research, development and production facilities across multiple regions.
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Micron (MU -0.44%), SK Hynix (SKHY -3.92%), and Samsung (SSNLF +0.00%) are some of the highest-flying stocks in the market this year. Their tremendous earnings results have been driven by a massive shortage in memory chips, a market dominated by the three companies. As AI hyperscalers buy up as many chips as possible, memory prices have gone through the roof.
Recent earnings results from SK Hynix and Samsung contain a major warning for Micron investors that could affect not just this quarter's results, but results well into the future. It could have a huge effect on the price investors should be willing to pay for the stock today.
Image source: Micron.
What did SK Hynix and Samsung report? The all-important driver of earnings for the three memory chip stocks over the last year has been pricing. The chipmakers renegotiate pricing for their chips frequently based on supply and demand. It takes years for a new manufacturing plant to start producing chips at scale, which means a spike in demand can send chip prices significantly higher. Once additional supply enters the market or demand falls, prices fall, and with higher operating costs, profits fall even more.
That's the cyclical nature of the memory chip market, but the market understands it well. It's why investors are paying single-digit earnings multiples for the chipmakers today. They expect the earnings cycle to approach its peak in the near future.
What's worrisome in SK Hynix's and Samsung's earnings releases is that peak earnings might be lower than anticipated. That's evidenced by weakness in pricing relative to expectations for both companies over the last three months.
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To be sure, SK Hynix still increased DRAM pricing by about 30% sequentially, and Samsung increased DRAM chip pricing by more than 40%. NAND pricing climbed even faster, mid-50% for SK Hynix and high-60% for Samsung.
Still, analysts were expecting better. Goldman Sachs analysts said they were looking for 39% growth for SK Hynix's DRAM chips. The analysts now expect just 19% price improvements for the current quarter. Morningstar's analysts were disappointed by Samsung's pricing, which fell short of their 48% estimate.
The results suggest Micron could also fall short of expectations for its DRAM pricing when it reports its quarterly earnings next month. Still, it's important to look into what might have caused the shortfall and what it means for each company's stock price.
What's weighing on memory chipmakers? Samsung and SK Hynix's lower-than-expected pricing indicates that AI demand may be slowing. That's exacerbated by SK Hynix's report showing slower-than-expected HBM4 shipments last quarter. Management assured investors that it was ramping HBM4 production in the second half of the year, which would positively affect overall pricing.
Perhaps the biggest weight on pricing is the long-term agreements the chipmakers are signing with customers. These agreements lock in pricing for customers for years in advance, leading to lower peak pricing, but they also protect against downside risk. It's a hedge against demand drying up and gives the chipmakers the confidence to build out new manufacturing capacity.
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The effect is already showing up, with pricing climbing more slowly than anticipated. Micron said it had covered 20% of its DRAM sales and about one-third of its NAND sales with long-term agreements as of last quarter. Those numbers could continue to climb, but they could also weigh on pricing and earnings.
As such, peak pricing is likely to fall short of analysts' prior expectations. While Micron and its competitors could fetch a slightly higher earnings multiple than in past earnings cycles due to long-term pricing stability, the earnings they'll be multiplying by will be lower. What's more, the potential long-term downside to earnings remains, as long-term agreements could simply pull demand forward, ultimately leading to a prolonged slide in earnings.
If you look around at semiconductor stocks lately, you'd think there was something terribly wrong with the industry. Many stocks have fallen hard over the past weeks, including shares of Micron Technology (MU -0.44%), which are down 27% since mid-June.
But the drop isn't tied to problems in Micron's business and is instead being fueled by broad investor skepticism about artificial intelligence (AI) spending.
Honestly, the sell-off appears more like a knee-jerk reaction than a true assessment of Micron's opportunities. Here's why.
Image source: The Motley Fool.
$1 trillion in semiconductor value vanished in just one month Micron's decline began shortly after the company released its results for the fiscal third quarter (ended May 28), in which sales increased 345% to $41.5 billion and earnings per share spiked more than 1,200% to $25.11.
Instead of being satisfied with such impressive results, investors began worrying that the massive spending spree from tech companies that's currently underway will eventually slow down, and that Micron's growth is unsustainable as a result.
Those fears were compounded in the following weeks as other semiconductor stocks suffered similar fates. A CNBC report found that 20 of the world's most valuable semiconductor companies -- including Micron -- lost $1.3 trillion in market cap value in July.
It's not uncommon for some investors to take their gains after a huge share price run-up -- Micron's stock is still up 720% over the past 12 months -- but the pessimistic outlook for Micron and its peers does seem unwarranted.
Consider that Alphabet, one of the largest investors in data centers, said just several weeks ago that it would raise its AI capex to up to $205 billion this year -- and that 2027 capex will "increase significantly."
Amazon's spending is rising rapidly, too. Management said the company's capex this year will reach around $220 billion, up about 66% from 2025 levels.
This doesn't sound like an AI spending slowdown to me.
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The latest Micron stock pullback is a buying opportunity With AI spending still well underway and Micron already benefiting from memory chip demand, investors who've been waiting to buy Micron may want to consider doing so now.
Management believes the memory shortage will persist at least through 2027, and fellow memory chip company SK Hynix thinks it could last through 2030.
What's more, Apple CEO Tim Cook recently said he expects memory prices to remain elevated, spurring the tech giant to raise prices on many of its devices directly because of higher memory costs. Apple likely wouldn't have made that big move if it believed higher memory costs were temporary.
The latest pullback has made Micron stock even more attractive, with shares trading at a trailing price-to-earnings (P/E) ratio of about 19, far below the tech sector average P/E ratio of 35. That's a discount you shouldn't pass up if you want some exposure to the booming memory chip business.
Shares of Micron Technology (MU -0.44%) are up 207% so far in 2026 (as of Friday market close).
While the rally has been impressive, investors may now be wondering whether the company's rapid business improvement is beginning to slow.
Image source: Getty Images.
Micron's rally has been extraordinary Micron sells DRAM, which helps processors handle data, and NAND, which stores it. The company also makes high-bandwidth memory (HBM), an advanced type of DRAM used in artificial intelligence (AI) systems.
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AI data center spending has increased demand for HBM and conventional server memory, while supply remains tight. Micron is shipping HBM4 in high volumes for its lead customer. Since HBM uses much more wafer capacity than conventional DRAM, rising HBM production also limits the supply of ordinary memory chips.
These favorable conditions helped Micron report revenue of $41.5 billion and adjusted earnings per share (EPS) of $25.10 in the third quarter of fiscal 2026 (ending May 28, 2026). Management expects revenue to be in the range of $49 billion to $51 billion and adjusted EPS in the range of $30 to $32 in the fourth quarter.
Expectations may now be running ahead of the cycle Memory earnings are cyclical. High prices encourage producers to add capacity, which can eventually weaken selling prices and margins.
While DRAM and NAND prices are still rising, the pace of increase is expected to slow sharply. Micron's average DRAM selling prices rose in the low-60% range sequentially in the third quarter, while NAND prices increased in the mid-80% range. However, TrendForce, a Taiwan-based industry intelligence and consulting firm, expects contract prices in the third calendar quarter to rise only 13% to 18% for conventional DRAM and 10% to 15% for NAND.
PC manufacturers are rebuilding DRAM inventories, while cloud providers are increasing server-memory purchases ahead of expected supply shortages in 2027. This supports Micron's near-term demand, although some of this early buying could reduce purchases in later quarters.
Parts of the NAND market are showing early signs of cooling. TrendForce found that NAND wafer prices stopped rising in July as high costs and weak consumer demand made buyers cautious, resulting in very limited trading activity.
Micron is currently trading at just 5.5 times one-year forward earnings, which appears cheap. However, a low forward price-to-earnings multiple can be misleading for a cyclical company when the estimate is based on unusually high earnings.
Triggers for pullback Slower increases in DRAM and NAND prices could cause Micron's profit margins to peak and analysts' earnings forecasts to stop rising. Wall Street's fiscal 2027 EPS estimate for Micron has jumped from $95.80 three months ago to $154.70. However, it has increased by only 1.2% over the latest month. If slower memory price growth causes earnings upgrades to stall or reverse, Micron's low forward earnings multiple may prove misleading.
Micron is increasing capital spending, with fiscal 2026 expenditures expected to reach roughly $27 billion. However, several major capacity projects will not begin contributing until mid-2027 or later. Hence, slowing earnings growth is a more immediate risk to the stock than a sudden increase in memory supply.
The bearish thesis could fail if HBM demand continues to exceed supply, the company executes its HBM4 ramp-up successfully, and gross margin remains elevated. Delays in new capacity could also extend the current memory cycle and keep earnings stronger for longer.
But I would wait rather than chase Micron after its extraordinary rally.
Key Takeaways AI spending and strong earnings could fuel Nasdaq gains in 2H 2026. Rising yields, AI payoff concerns and cash burn pose key risks. Nasdaq ETFs like QQQ, ONEQ, QQQE offer diversified ways to play the tech-led rally. After a strong 2025 and solid gains in the first half of 2026, the big question for investors is whether the stock market rally can keep going in the second half of the year. Much of Wall Street’s recent strength has been driven by artificial intelligence (AI) and the broader technology sector.
The Nasdaq Composite has gained 13.7% so far this year while the Nasdaq-100 has added 16.6%. With technology stocks dominating the Nasdaq, investors are now wondering whether this tech-led momentum has enough steam to continue through 2H 2026 and deliver meaningful gains for the Nasdaq Composite and the Nasdaq-100. Let’s take a closer look.
Factors That Favor Nasdaq Investing in 2H 2026AI Boom Still Has Room to Run
The AI boom has dominated the broader market for the past three years, and the wave is showing no signs of retreating. Strong demand for AI chips, cloud infrastructure, data centers and software is continuing to fuel technology spending.
Major tech companies are ramping up AI investments as businesses increasingly adopt AI to improve productivity and efficiency. In 2025, major tech companies incurred $410 billion in capital expenditures, while AI spending among hyperscalers is projected to touch $765 billion this year, before rising to nearly $1.2 trillion in 2027, according to Goldman Sachs, as quoted on CNBC.
Decent Valuation of the Nasdaq-100 Index
As of July 31, 2026, the tech-heavy Nasdaq 100 index’s forward price/earnings (P/E) ratio stood at 32.61X, almost in line with the year-ago P/E of 32.67X, per WSJ. This is a reassuring sign given that the Russell 2000 Index’s forward P/E ratio rose 15.6% from the year-ago level. Meanwhile, the S&P 500’s forward P/E ratio inched up 1.5% from the year-ago value.
Notably, the Nasdaq-100 has gained just 0.7% over the past month (as of Aug. 6, 2026), compared with a 2.8% advance in the S&P 500. The recent pullback in technology stocks has helped ease some of the Nasdaq’s elevated valuations, creating a more attractive entry point for tech investors.
Solid Earnings Growth for Big Tech
Q2 earnings for the “Magnificent 7” or “Mag 7” group of companies (i.e., NVIDIA, Amazon, Apple, Microsoft, Meta, Alphabet and Tesla) are expected to be up 85.5% from the same period last year on 27.5% higher revenues, per the Earnings Trends issued on Aug. 5, 2026.
NVIDIA (NVDA), Micron (MU) and Alphabet (GOOGL) are material contributors to the Tech sector’s growth profile in Q2 2026 and the coming quarters. Barring the contribution from these three tech players, Q2 earnings growth for the rest of the Zacks Tech sector dropped to +31.4% (from +93.6%).
For the Mag 7 group, total 2026 earnings are expected to increase by 43.4% on 20.9% higher revenues, which would follow the group’s 2025 earnings growth of 24.8% on 15.5% higher revenues.
Excluding the Mag 7 contribution, total earnings for the remaining S&P 500 companies are expected to grow 20.1% in 2026, which compares to 9.8% growth in 2025, 4.4% growth in 2024, and a 4.4% decline in 2023.
Factors That Go Against Nasdaq Investing in 2H 2026Rising Rate Worries
Sticky inflation and rising rate fears are putting pressure on markets. Treasury yields climbedsharply following the Federal Reserve's decision to keep interest rates unchanged at the July-end meeting without offering clear forward guidance.
The benchmark 10-year Treasury yield closed July at 4.75%, its highest level since January 2025 (per CNBC), while the 30-year Treasury yield climbed to 5.27%, the highest since 2007.
There is a 54.5% chance of a 25-bp Fed rate hike in the September meeting (at the time of writing), per CME FedWatch Tool. Investors grew increasingly concerned that elevated borrowing costs could pressure equity valuations.
Rising interest rates hurt growth sectors like technology more because higher bond yields cut the present value of future corporate earnings, hitting growth companies (that eye distant profits) hardest.
AI Payoff Timeline Concerns
Despite the strong AI boom, investors are increasingly questioning how quickly massive AI investments will translate into meaningful profits. Any delay in monetizing AI could pressure valuations and create volatility across technology stocks and the broader Nasdaq Index.
Tech Sector’s Cash Burn
The aggressive investment in AI is already weighing on the free cash flow of the companies, with Alphabet reporting its first-ever negative free cash flow in the second quarter, thanks mainly to $44.9 billion in capital expenditures. If AI revenues fail to scale quickly enough, rising cash burn could become a key risk for tech stocks and their elevated valuations.
Amazon also reported negative free cash flow for the trailing 12 months of $7.6 billion, while Meta revealed a 91% plunge in cash generation from a year earlier, as quoted on CNBC.
China Tech Occasionally Threatens Nasdaq’s AI Leadership
China’s tech giants are emerging as a growing threat to U.S. Nasdaq tech stocks. With Chinese firms offering competitive AI models and services at lower costs, they could pressure U.S. Big Tech leaders and intensify competition for global AI spending (read: Moonshot AI Raises the Stakes for Big Tech? ETFs in Focus).
ETFs in Focus The road ahead for the Nasdaq index has both risks and rewards, but with tech giants aggressively pursuing the AI boom, the potential rewards could outweigh the risks. Investors can thus play the following Nasdaq ETFs as the basket approach minimizes the company-specific concentration risks.
Invesco QQQ (QQQ - Free Report)
The 103-stock fund follows the Nasdaq-100 index. The fund invests about $481 billion in assets and charges 18 bps in fees. The fund invests about 37% of its weight in the Mag 7 stocks, while the broader tech sector takes about 65% of the fund, followed by Consumer Discretionary. The fund is heavy on NVIDIA.
Fidelity NASDAQ Composite Index ETF (ONEQ - Free Report)
The fund offers exposure to the broad-based NASDAQ Composite Index. The $10.8-billion asset fund invests about 48% of its weight in the Mag 7 stocks. It charges 31 bps in fees. The fund is heavy on NVIDIA and Apple, with each taking a double-digit weight.
Invesco NASDAQ 100 ETF (QQQM - Free Report)
The $102.-5-billion-asset QQQM (often known as the Q mini) has a lower management fee. Shares of the Q mini are also a fraction of the value of QQQ, putting the mini within reach of small savers who might be discouraged by QQQ’s price, per etfdb. It charges 15 bps in fees.
NEOS Nasdaq-100 Hedged Equity Income ETF (QQQH - Free Report)
The $383.9-million-asset fund looks to offer tax-efficient monthly income through a data-driven option strategy on the Nasdaq-100. The fund charges 68 bps in fees and has an annual yield of 8.22%. The ETF also carries heavy concentration risk in the Mag 7 stocks.
Invesco NASDAQ Next Gen 100 ETF (QQQJ - Free Report)
The 106-stock fund tracks an index of the largest non-financial stocks listed on Nasdaq that aren’t included in the Nasdaq-100 index. The portfolio may be concentrated in mid-capitalization stocks. The $1.17-billion-asset fund charges 15 bps in fees. No stock makes up more than 2.43% of the fund. The tech sector takes about 28.39% of the fund, followed by healthcare (23.77% weight) and consumer discretionary (20.32% weight).
Direxion NASDAQ-100 Equal Weighted Index ETF (QQQE - Free Report)
The NASDAQ-100 Equal Weighted Index consists of companies in the NASDAQ-100 Index, but each of the securities is initially set at a weight of 1.00% of the Index. The $1.40-billion-asset fund charges 35 bps in fees.
The underlying Nasdaq-100 Dorsey Wright Momentum Index consists of 21 securities from the Nasdaq-100 index with the highest price momentum. It charges 58 bps in fees. The fund has an asset base of $72.5 million.
The underlying Pacer Nasdaq 100 Top 50 Cash Cows Growth Leaders Index seeks to provide exposure to large-cap U.S. stocks with above-average free cash flow margins. The $21.2 million fund charges 49 bps in fees while yielding only 0.05% annually.
iShares Nasdaq 100 ETF (IQQ - Free Report)
This Nasdaq-100 fund offers a cost-effective option that can help investors keep more of their returns and grow their investments. The fund has an expense ratio of 0.12%, with a temporary fee waiver reducing it to 0.10%. Having debuted on Jul. 9, 2026, IQQ has amassed an asset base of $345.5 million (read: The Cheapest ETFs for Building a Core Portfolio).
State Street SPDR Portfolio Nasdaq 100 ETF (QNDX - Free Report)
This Nasdaq-100 ETF also charges only 10 basis points in fees. The 102-stock fund hit the market on Jun. 23, 2026. The fund currently has an asset base of $183.9 million.
ProShares Nasdaq-100 High Income ETF (IQQQ - Free Report)
The underlying Nasdaq-100 Daily Covered Call Index tracks the performance of an investment strategy that combines a long position in the Nasdaq-100 Index with a short position in Nasdaq-100 Index call options. The fund charges 55 basis points in fees and has an annual yield of 5.75%. The fund has an asset base of $409.1 million.
The S&P 500 doesn’t seem to know how to stop climbing. As of Tuesday’s close, the index had notched 25 all-time highs in 2026 alone, according to Bloomberg Terminal data — following 39 last year and 57 in 2024. For long-term investors, the real challenge isn’t spotting the next record. It’s figuring out what to do once you’ve stopped being surprised by them.
A Rally That Keeps Setting Records Second-quarter earnings are on pace to grow 29% year-over-year, Bloomberg Opinion’s Jonathan Levin notes, and analysts are raising their 12-month EPS estimates at a pace he calls unusually fast. That earnings strength is showing up in returns: the S&P 500 is up 13.7% on a total-return basis through August 7 — the seventh-best start to a year in 33 years.
That’s notable for another reason. Back-to-back double-digit gains aren’t rare exactly, but 20%-plus back-to-back years are: 2023’s 26.3% and 2024’s 25.0% marked the first time that had happened in two and a half decades. Add 2025’s 17.9% total return, and the index has now logged three straight double-digit years — and a fourth is well within reach.
That said, three straight double-digit years isn’t the same as three straight cheap years. The S&P 500’s forward price-to-earnings ratio has climbed alongside the index itself, which means a growing share of these gains is coming from investors paying more for each dollar of expected earnings — not just from the earnings themselves. That’s not a red flag on its own. It’s a reminder that the earnings growth Levin points to needs to keep showing up, or the multiple expansion that’s fueled part of this run could reverse just as quickly.
Two Stocks, One Outsized Push Much of 2026’s climb traces back to two companies punching well above their index weight.
Company Contribution to S&P 500 Gains Index Weight 2026 YTD Return Nvidia (NASDAQ:NVDA | NVDA Price Prediction) +1.49 percentage points ~6.9% ~+20% Micron Technology (NASDAQ:MU) +1.13 percentage points ~1.5% ~+208% Apple (NASDAQ:AAPL) +1.05 percentage points ~6.0% ~+15.5% Micron’s number is the one worth sitting with. A stock with a fraction of Nvidia’s index weight generated nearly as much index-level contribution — because a 208% return can move markets even from a small starting position. Nvidia, meanwhile, did it the old-fashioned way: enormous weight, solid (not spectacular) returns, outsized dollar impact. Together, these two stocks — with Apple close behind — account for a meaningful chunk of why the index keeps printing new highs.
Micron’s run isn’t a mystery, either. The company makes high-bandwidth memory chips that feed directly into the same AI data center buildout powering Nvidia’s business — meaning both stocks are, in a sense, riding the same underlying demand wave from two different angles of the supply chain. That’s worth knowing if you’re evaluating either stock individually: their fortunes are more linked than their business descriptions might suggest.
Granted, that’s not a guarantee — it’s a probability. The exception that proves it: in 2007, a fresh high preceded a six-month stretch that lost 12.33%, right before the financial crisis. Investors who treated that breakout as a green light learned the hard way that momentum and safety aren’t the same thing.
There’s a second wrinkle worth flagging. In 2025, seven stocks — no, not the Magnificent Seven — accounted for just over half the index’s gains, led by Nvidia’s 15.5% contribution alone, according to RBC Wealth Management. Names like Alphabet (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Palantir Technologies (NYSE:PLTR) rounded out that list — a materially different lineup from Micron and Apple’s current showing. Leadership rotates. The stocks driving today’s rally aren’t guaranteed a repeat performance next year, even if the index itself keeps climbing.
Key Takeaway History leans bullish here — a median six-month gain of 8.25% following a fresh high, with 76.5% of prior instances finishing positive, is a real edge, not noise. But “probably” isn’t “certainly,” and 2007 is proof the pattern can break. Smart investors should treat this rally as a reason for optimism, not complacency — and remember that owning the S&P 500 index, rather than betting on whichever stock drove last year’s gains, is what actually captures that 76.5% probability.
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On the surface, there appears to be no comparison between Space Exploration Technologies (SPCX +15.83%) and Micron Technology (MU -0.44%). One is a cash-burning furnace. The other is a cash-printing machine.
Their latest earnings results underscore just how different the two companies are. SpaceX posted a net loss of $541 million in the second quarter and over $2 billion in the first half of 2026. Micron delivered a $28.2 billion profit in its fiscal 2026 third quarter.
It might seem that Micron would be the hands-down winner between the two. But the better stock pick isn't as obvious as the numbers suggest.
Image source: Getty Images.
Stark valuation differences Micron is clearly blowing SpaceX out of the water in terms of profitability. However, investors have given SpaceX a market cap of $1.4 trillion, while Micron's market cap is a little over $1 trillion.
Keep in mind, too, that those market caps are closer now than they were in the immediate aftermath of SpaceX's historically large initial public offering (IPO). SpaceX stock is down almost 30% since its IPO, while Micron's shares have more than tripled year to date.
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Even after its sharp decline, SpaceX trades at an astronomical (no pun intended) 73.4 times trailing 12-month sales. Meanwhile, Micron looks dirt cheap despite racking up a huge gain this year, with a forward earnings multiple of only 5.3.
Does SpaceX's growth trajectory justify the stark valuation gap? Nope. The company's revenue jumped 92% year over year in Q2 to $7.8 billion. However, Micron's revenue increased nearly 3.5x year over year and 74% quarter over quarter in its fiscal Q3 to $41.5 billion.
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Looking beyond the numbers I think, though, that investors need to look beyond just financial numbers and current valuations when evaluating these two stocks. Understanding why the market values SpaceX and Micron so differently is important.
For one thing, SpaceX's losses don't point to a failing business. The company's connectivity segment (which centers on its Starlink satellite internet service unit) is profitable. Its heavy investments in artificial intelligence (AI) infrastructure are dragging down the bottom line, but those investments could pay off handsomely over time.
Starlink could become an even bigger winner for SpaceX as it seeks to disrupt telecom giants such as AT&T (T +0.34%) and Verizon (VZ +0.15%). SpaceX has an even bigger opportunity if it can fulfill founder Elon Musk's vision of hosting AI applications in space and beaming the results back to Earth cost-effectively.
There's also a reason why Micron's tremendous success hasn't translated to a higher valuation. Investors know that Micron is a cyclical stock that flourishes when demand exceeds supply for memory and flounders when supply exceeds demand. While the company is currently in a strong up cycle, the fear among many investors is that a slowdown in AI data center construction could bring the good times to an abrupt end.
Which is the better stock to buy? Interestingly, Wall Street is more bullish on SpaceX than on Micron in the near term. The average 12-month price target for SpaceX reflects potential upside of over 90%, compared with around 65% for Micron.
I think, though, that Micron is the better stock to buy for investors focused on the next two or three years. The supply demand imbalance for memory isn't likely to be addressed anytime soon, in my view. I'm also leery of buying SpaceX shares, with more rounds of lockups expiring and insiders able to sell large blocks of shares.
However, over the longer term, the choice between these two growth stocks is more difficult. SpaceX seems to have more optionality (multiple ways to grow) than Micron. I expect the company will eventually be highly profitable. It wouldn't surprise me at all if SpaceX is a bigger winner than Micron over the next 10 to 20 years.
That said, though, the adage that "a bird in the hand is worth two in the bush" seems applicable in this case. If I had to buy only one of these stocks, it would be Micron. The memory maker's risk-reward proposition is more favorable than SpaceX's -- at least for now.
Apple Chief Executive Officer Tim Cook dropped a bombshell on investors during the company's latest quarterly earnings call, noting a "100-year flood" in memory chip pricing, suggesting a major event had occurred that upended all the company's usual analysis. This could be a major problem for Apple, as it has to raise prices just to maintain margins, potentially stretching already-indebted consumers and causing sales issues.
However, just because Apple may be struggling due to rising memory chip prices doesn't mean that investors will miss out on it. Instead, I'd suggest looking at memory chip companies to invest in, as they're the ones making a killing from rising prices.
Two that I think are well-positioned to cash in are Sandisk (SNDK -3.68%) and Micron (MU -0.44%). Each company has been on an absolute tear this year due to rising memory chip prices, and the trend could continue into 2027 if prices remain high.
Apple CEO Tim Cook. Image source: Apple.
Sandisk and Micron are making a fortune from rising memory prices Sandisk and Micron each fabricate memory chips. However, Sandisk focuses only on NAND memory, while Micron produces both NAND and DRAM. Both types of memory are used in Apple products and in data centers. DRAM memory is much faster but has a lower storage capacity. NAND memory is typically used for long-term data storage, although it isn't as fast as DRAM.
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Each chip type is vital in a wide variety of computing devices. Still, with data centers sucking up all of the memory chip production capacity, every electronic device is being affected by soaring prices.
Apple isn't the only company in a pinch, either. Amazon noted on its conference call that it was raising its 2026 capital expenditure forecast from $200 billion to $220 billion due to rising memory chip prices. That likely echoes sentiment across the board from various AI hyperscalers that are dealing with the same problem, but it's not a problem for Sandisk and Micron. Both companies are making a fortune from rising prices and increased demand.
Sandisk recently reported Q4 of fiscal year 2026 earnings (ended July 3) and delivered a jaw-dropping 372% year-over-year revenue growth rate. Even more impressive was a 51% quarter-over-quarter growth rate, showing that rising prices are still ongoing.
Sandisk noted that two-thirds of its revenue growth came from rising prices and only one-third from increased volumes. That's a major problem for companies like Apple and could persist in the future, as Sandisk expects revenue to continue rising at a rapid rate next quarter.
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During Micron's last earnings report, it noted that the tight memory chip market conditions will last beyond 2027. So, the memory chip market doesn't have a clear recovery in sight, and this problem will only get worse for Apple and other companies buying huge amounts of memory chips.
However, these two stocks are priced to rise soon.
Sandisk and Micron's stocks are cheap Because the market is worried about the sustainability of chip demand, which typically endures a boom-and-bust cycle, the stocks are relatively cheap. Sandisk is priced at 6.3 times FY 2027 earnings -- a very cheap price tag considering its rapid growth.
SNDK PE Ratio (Forward) data by YCharts
Not to be outdone, Micron is priced at 5.7 times FY 2027 earnings (ending August 2027).
MU PE Ratio (Forward 1y) data by YCharts
With each stock priced this low, I wouldn't be surprised to see them rally through the end of this year and into 2027. A cyclical downturn could be coming, but it won't be until 2028 at the earliest. That leaves a lot of time for investors to make money on these two, and I think now is the perfect time to buy.
A 30% stock decline usually grabs investors' attention. Some immediately see a buying opportunity. Others worry that the stock could fall even further.
Micron's (MU -0.44%) recent correction has sparked exactly that debate.
But before deciding whether to buy the stock, investors should ask a simple question. Has Micron become cheaper? Or have investors simply become less optimistic?
The answer could determine whether today's pullback represents an opportunity or a warning.
Image source: Getty Images.
A lower stock price doesn't always mean a better investment Many investors make the same mistake after a sharp correction. They compare today's stock price with yesterday's.
Micron recently traded near an all-time high. Today, the stock sits roughly 30% below that level. It feels like a bargain.
But investing doesn't work that way. A stock becomes attractive when its future earnings justify its price, not simply because it trades below a previous high. Only if future earnings remain intact does the current correction lead to a better entry price.
That is why investors should spend less time looking at the chart and more time asking what has changed in the business lately.
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Has anything really changed? So far, the long-term investment story looks largely intact.
Technology companies continue to invest aggressively in artificial intelligence infrastructure, with large tech companies committing hundreds of billions of dollars in capital investments in 2026. Amazon has hiked its spending target to $220 billion, and Alphabet aims to spend its own $200 billion.
As advanced memory remains a critical component inside AI servers, the demand for Micron's products remains extremely high. If those trends continue over the next several years, Micron could still grow revenue and profits for a while.
In other words, the business may look much healthier than the stock price suggests.
So why did the stock still fall if nothing much has changed? Here's the thing. The market rarely waits for bad news to appear. Instead, it constantly adjusts expectations.
A year ago, investors expected Micron's profits to surge as AI spending accelerated. But Micron outperformed even the most robust estimates, leading to a remarkable surge -- more than 700% in share price over the last 12 months.
Today, many investors still expect strong growth. Yet they have become more cautious. Some worry that memory manufacturers will eventually expand supply to levels beyond demand. Others question whether today's exceptionally strong profits can last once the AI infrastructure boom matures.
And there's also a group of early investors just cashing out their massive profits.
In other words, those concerns do not necessarily mean Micron's business has weakened. They simply mean investors have become less willing to pay for future growth.
Here are the key areas to focus on When thinking about Micron's stock trajectory from here, investors usually focus on the next quarterly earnings report.
But that's not where they should focus. The real question isn't whether Micron can report another strong quarter, but whether the company can keep earning significantly more money five years from now than it does today.
If the answer is yes, today's pullback could prove to be a temporary setback. If the answer is no, the recent decline may simply reflect more realistic expectations.
In other words, rather than guessing where the stock will go next, I would watch three things over the coming quarters.
First, does demand for AI memory remain strong?
Second, can Micron continue growing its profits?
Third, can the company maintain healthy margins even as competitors expand production?
If Micron continues delivering on all three, the long-term investment thesis remains intact.
What does it mean for investors? Micron's 30% correction could be a great opportunity to buy. It could, however, expose risks that investors previously ignored.
The important point is that a lower stock price does not automatically make a stock more attractive. Instead, investors should ask whether the business fundamentals changed recently.
If Micron continues to grow profits while AI infrastructure spending remains strong, today's correction could prove an attractive entry point for long-term investors.
But if the company's current profits represent the peak of another memory cycle, the stock may have further to fall.
Ultimately, investors need to answer this question themselves before making a final call on Micron's stock.
The behavior of Micron (MU -0.44%) stock has shown extreme volatility, particularly over the last year. The stock made gains of almost 690% over the last 12 months, only to fall by nearly 30% since peaking in June.
The pullback was likely a breather from a run that accelerated in April. Nonetheless, a relatively low valuation may leave some investors confused as to why Micron has not risen further. However, a key factor plays into that, and consequently, the stock could struggle to realize its full potential for that reason.
Image source: The Motley Fool.
Why Micron stock may struggle Micron's stock is likely not meeting its full potential due to its historical volatility.
In some sense, the stock is an incredible bargain below $1,000 per share. The company has experienced massive revenue increases when demand exceeds supply and chip prices spike. However, that trend cuts both ways. When supply exceeds demand, revenue growth has often experienced dramatic reversals, causing profits to fall and the stock price to crater.
Oversupply is not an issue right now. In the first nine months of fiscal 2026 (ended May 28), revenue of $79 billion surged 203% compared to the same period last year. Additionally, the company's $47 billion in net income for the first three quarters of fiscal 2026 amounted to a 60% net margin. It also far exceeded the $5 billion earned in the same period one year ago.
Looking forward, analysts forecast 247% yearly revenue growth in the current fiscal year. Also, while the 85% revenue increase forecast for fiscal 2027 is technically a growth slowdown, it still suggests the upcycle is unlikely to end soon.
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Nonetheless, that profit increase amounted to a trailing price-to-earnings (P/E) ratio of 20, a low level given that massive growth. Furthermore, the forward P/E ratio of 12 shows that investors are reluctant to bid the stock price higher despite the anticipated growth that the forward multiple implies.
Admittedly, the current demand for high-bandwidth memory (HBM) has benefited Micron. The company has also compelled customers to sign five-year price agreements, offering Micron a degree of safety that the previous one-year contracts did not.
Still, investors need to remember that supply has caught up (and usually exceeded) demand in every previous upcycle. Moreover, it may face competition beyond its traditional rivals, Samsung and SK Hynix. Chinese manufacturers like ChangXin Memory Technologies may begin producing HBM by the end of the year, potentially reducing Micron's pricing power in the future.
Given the revenue forecasts, Micron's growth is unlikely to end soon. Nonetheless, the potential entry of another competitor shows that investors must always be on the lookout for a downturn that could validate the concerns of the company's bears.
Investing in Micron Investors should accept that Micron's historical cyclicality likely means Wall Street will continue to sleep on the company's growth potential.
Admittedly, the company's current financials give investors no reason to believe its rally will end soon. Unfortunately, history shows the profound negative effects of a Micron downcycle, and its current success will not prevent HBM from becoming cheaper as supply catches up to demand.
The five-year agreements could mitigate the effects of a downturn. Still, further gains in the stock will likely depend on the chip stock showing that the upcycle is far from over.
Micron (MU -0.44%) is spending billions to expand the memory infrastructure powering artificial intelligence. Its new fabs could strengthen pricing power and long-term growth, but they could also revive the oversupply cycle that has repeatedly punished memory investors.
Stock prices used were the market prices of July 21, 2026. The video was published on Aug. 1, 2026.
Rick Orford has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy. Rick Orford is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link, they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.
NVIDIA (NASDAQ:NVDA | NVDA Price Prediction) and Micron Technology (NASDAQ:MU) both just posted quarters that reframe the AI infrastructure story heading into 2027.
NVIDIA delivered $81.615 billion in Q1 FY27 revenue as its compute and networking stack scaled together. Micron answered with $41.456 billion and HBM4 in volume production. One sells the AI factory. The other sells its memory.
Compute Factories Lift NVIDIA. HBM4 Lifts Micron. Jensen Huang framed the quarter bluntly: “The buildout of AI factories, the largest infrastructure expansion in human history, is accelerating at extraordinary speed.” The proof sits inside the segment mix.
Data Center revenue hit $75.246 billion, up 92% YoY, with Data Center Networking surging 199% YoY to $14.8 billion as NVLink and Spectrum-X pulled hyperscalers into full-rack purchases. Guidance of $91 billion for Q2, excluding China compute, tells you demand is not the constraint.
Micron’s ramp is a different kind of shock. Sanjay Mehrotra called it plainly: “In the AI era, memory has become a strategic asset for our customers.” Cloud Memory alone did $13.769 billion, nearly tripling in nine months.
Non-GAAP gross margin jumped to 84.9% from 45.7% at the FY25 close, which is the sharpest memory pricing swing in years. HBM4 is already shipping in volume to a lead accelerator customer, with samples flowing to others.
Business Driver NVIDIA Micron Main Growth Engine Blackwell 300 + NVLink fabric HBM4 on 1-beta DRAM Q1/Q3 Revenue $81.6B $41.5B Gross Margin 75% 84.9% Next Guide $91B $50B Platform Lock-in vs. Scarcity Economics NVIDIA is betting on stack depth. The Vera Rubin platform, Dynamo 1.0 inference software, and named commitments with OpenAI, Meta, and Anthropic push customers deeper into CUDA and NVLink. $119 billion in supply commitments signals that Huang is buying capacity years out. The $80 billion buyback authorization and dividend hike from $0.01 to $0.25 per share signal cash is no longer a scarce input.
Micron plays a narrower, sharper hand. As the only U.S. based memory manufacturer, it has locked in multi-year Strategic Customer Agreements to smooth the notorious memory cycle. HBM4E on 1-gamma DRAM is targeted for volume production in calendar 2027, right when Rubin ramps. That timing is not a coincidence.
The Real Test Is 2027 Supply I will be watching whether NVIDIA’s 50% hyperscaler revenue concentration diversifies as sovereign AI and enterprise demand scale.
For Micron, the question is whether HBM4E ships on time and whether those Strategic Customer Agreements actually blunt the next downcycle. Shares tell part of the story already: NVDA is up 17.56% YTD, while MU has run 209.03%.
Why I Lean NVIDIA for Durability, Micron for Torque If I want a compounder with platform gravity, NVIDIA wins. A forward P/E of 23x against 85% revenue growth is the rare combination in mega-cap tech, and the ecosystem lock keeps competitors chasing.
For a higher-variance bet, Micron looks more interesting to me. A forward P/E of 5x prices in a cycle rollover that HBM4E and the customer agreements are designed to prevent. Investors weighing Micron should respect the memory cycle history and treat HBM4E execution as the real 2027 catalyst. Both can work. They just require different stomachs.
Contact [email protected] for any questions or corrections.
Although some skeptics frame demand for memory chips and the acceleration in capital expenditures (capex) by artificial intelligence (AI) hyperscalers as a bubble, recent remarks from Elon Musk cut through this narrative with unusual clarity.
During the recent earnings call for Space Exploration Technologies, otherwise known as SpaceX, Musk said that "memory output is increasing by around 20% per year" while "demand is increasing by 200% a year, maybe higher."
This dynamic positions pure-play memory producers like Micron Technology (MU -0.44%) for outsize gains, making now a compelling entry point for investors who understand the forces of bringing next-generation AI applications into production amid the rising demand for the infrastructure that supports these developments.
Space Exploration Technologies CEO Elon Musk. Image source: The White House.
Memory specialists are in an advantageous position right now In a mature industry, 20% annual growth in output would normally be celebrated. The explosion of AI workloads has, however, shifted adoption of specialized chips into an exponential regime. Training large language models and inference deployments consumes ever-larger volumes of high bandwidth memory (HBM) chips, with each new generation multiplying the requirement.
When demand grows by an order of magnitude faster than supply, scarcity becomes inevitable. Under these conditions, basic economics suggests that prices rise and profit margins expand for the businesses that can deliver the resource in question.
Micron focuses on advanced DRAM and HBM, placing it directly in the center of the bottleneck Musk cites. Smart investors have already recognized how rising capex is affecting Micron, as the company's pricing power is directly fueling improved profitability and helping fund aggressive manufacturing scale.
MU Revenue (TTM) data by YCharts
Why now is the time to buy Micron stock The stock market often overreacts to short-term signals even when longer-term fundamentals remain intact. Micron stock reached an all-time high in late June, only to sell off considerably shortly after. Micron's decline reflects both a familiar pattern of profit-taking after a strong rally and ongoing skepticism surrounding AI infrastructure spending.
Musk's observation about memory prices reframes Micron's decline as noise rather than a signal that shares should continue to plummet. If memory remains the binding constraint for data center build-outs, this would imply Micron is in the early phase of capacity expansion rather than the late phase of excess supply. Against this backdrop, capital will continue to flow toward the memory bottleneck, benefiting the companies that produce it.
Buying Micron stock on the dip means investors gain exposure to rising memory prices at a steep discount to the valuation the market assigned just a handful of weeks earlier. In other words, Micron's sell-off does not erase the supply-demand gap in the memory market; rather, it temporarily lowers the valuation multiple while the physical shortage persists. For investors who agree with Musk's framing, Micron's current price point represents a much more attractive risk-reward profile than the levels that prevailed during the all-time high.
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Why Micron stock can sustain upside in the years ahead System designers should continue demanding denser, faster memory solutions -- reinforcing the need for the very products Micron supplies. At the same time, scarcity underscores the strategic value of reliable production capacity, giving manufacturers like Micron greater leverage in securing long-term contracts.
Investors who correctly interpret the imbalance Musk alluded to will treat Micron's recent sell-off as an opportunity to buy the dip rather than a reason to exit their position. The capex supercycle is not ending. Instead, it is being rewritten by a genuine shortage that only additional output can relieve.
Identifying memory as the limiting factor in data center expansion does not signal a peak in the AI build-out. It explains why demand for Micron's products should remain elevated, prices are more likely to continue rising, and the stock offers a rational place to invest right now.
Micron Technology (MU -0.44%) is an odd stock. While it has risen an incredible amount this year (up 214% in 2026), its valuation on multiple metrics still looks dirt cheap. There are a few reasons for this, and it raises the question: Has the stock become too cheap to ignore?
Let's take a look at why Micron's stock appears as cheap as it does and see whether this is a generational buying opportunity or a value trap.
Image source: The Motley Fool.
Micron's business is cyclical Micron produces memory chips, which are used in just about every computing device. It produces both types of memory: DRAM and NAND. DRAM is high-speed memory that's utilized in computing devices for rapid memory access, while NAND is often used in long-term storage applications. Regardless, both types are in high demand thanks to AI data center build-outs. The primary issue here isn't demand.
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There isn't one factor that sets Micron's product apart from its competitors. Most memory products are interchangeable, and end users don't care if they're using memory from Micron or another supplier. This makes the memory chip industry commoditized, which can be difficult to operate and invest in.
The reason for Micron's latest success is soaring memory chip prices. There is currently a supply shortage, so prices are moving higher. Micron is building some additional production capacity, but not enough to meet the growing demand. So its revenue and profits are soaring as customers outbid each other to gain access.
This supply/demand imbalance won't last forever, as either demand will drop or supply will increase enough, and prices will stabilize. Micron is actively working to increase its production capacity and plans to have another factory online between mid-2027 and late 2028. This increase in production capacity is the right thing to do, although it could cause the price of its products to fall.
As a result, the market doesn't fully value Micron's stock because it's worried about an inevitable demand drawdown. So, it has a low valuation of 5.7 times fiscal year 2027 earnings (ending August 2027).
Data by YCharts.
However, if you look at Micron's average trailing P/E ratio over the past decade, it's 22. So, even if Micron's stock rises to half of its average valuation, the stock could double by the end of fiscal year 2027.
Any time you can secure a stock that doubles in the next year, it's a no-brainer buy for investors. However, this isn't a set-it-and-forget-it stock. Instead, investors must monitor the situation in the memory chip market. If prices start to tumble, Micron's stock will follow suit, and it will be time to re-evaluate.
What's the hottest area for investors right now? A good argument could be made for artificial intelligence (AI) memory stocks. Shares of Micron Technology (MU -0.44%) have more than tripled so far in 2026. Sandisk (SNDK -3.68%) has delivered an even greater return, with its stock up close to 6X year to date.
But, as the fund disclosures say, past performance isn't necessarily indicative of future results. Which of these two AI memory stocks is the better pick to own over the next three years? Here's how Micron and Sandisk stack up against each other.
Image source: Micron Technology.
Historically, Micron has been a cyclical stock with wild price swings. Its shares are still highly volatile, but the price swings have primarily been in one direction -- up.
There's a simple reason why that's the case. Demand for memory, particularly high-bandwidth memory (HBM), has gone through the roof so much that Micron and other manufacturers can't create enough supply to keep up.
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Don't expect these dynamics to change anytime soon. Micron CEO Sanjay Mehrotra said in his company's fiscal 2026 third-quarter earnings call in June, "We expect tight conditions to persist beyond calendar 2027 as a result of AI-driven demand across all segments coupled with structural supply constraints."
The segments Mehrotra referred to include cloud memory, core data center, mobile and client, and automotive and embedded. Micron makes DRAM, HBM (which uses DRAM as a component), and NAND memory chips -- and all are enjoying strong demand.
What if the AI data center boom loses fizz? Micron expects another strong tailwind from humanoid robots. Mehrotra predicts that this nascent market will have a "sustained, substantial multi-decade memory demand cycle."
The case for Sandisk Sandisk's 2026 performance is impressive, making it the biggest winner by far in the S&P 500 (^GSPC +0.62%). What's even more stunning is that the memory stock has skyrocketed roughly 3900% since it was spun off from Western Digital (WDC -3.81%) in February 2025.
Like Micron, Sandisk is riding the wave of a massive supply demand imbalance. AI data centers are gobbling up every bit of NAND memory they can get. That's because NAND flash has become the most cost-effective solution for large-scale AI inference (applying trained AI models to analyze real data).
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Can this momentum last? Sandisk CEO David Goeckeler thinks so. He told analysts in the company's April 2026 earnings call that Sandisk now has "a durable growth model, a valuable franchise, and a business built to generate substantial, sustained cash flow."
Wall Street believes Sandisk has plenty of room to run. The consensus 12-month price target reflects an upside of over 50%. Of the 23 analysts surveyed by S&P Global (SPGI +0.73%) in August, 18 rated the stock as a "buy" or "strong buy."
Better AI memory stock to own? I expect both of these AI memory stocks to deliver market-beating returns over the next three years. However, if I had to pick only one to own, I think the nod goes to Micron.
For one thing, Micron has a more diversified business than Sandisk. If demand for one type of memory slows, Micron could continue to grow. Size matters, too. Micron is roughly five times larger than Sandisk and ranks as the world's third-largest memory chip manufacturer by revenue.
Valuation is another consideration. Sandisk isn't expensive, with shares trading at below 19 times forward earnings. But Micron looks like a steal with a forward earnings multiple of only 5.3. The stock's price-to-earnings-to-growth (PEG) ratio, which is based on analysts' five-year earnings growth projections, is also an absurdly low 0.12.
Granted, if data center demand slows significantly, both of these stocks will be hit hard. I don't envision that happening over the next three years.
Key Takeaways Earnings for the reported S&P 500 companies in Q2 are up 42.2% YoY on 14.8% higher revenues. The Q2 cycle begins to wind down soon, with 7 of the 16 Zacks sectors having reported all their results. Only Nvidia remains to report from the Mag 7 group, with its results expected on August 26th. The Q2 earnings season continues to validate our constructive view on corporate fundamentals. Rather than simply clearing reduced consensus hurdles, reporting companies are offering encouraging reads on order trends, margin resilience, and full-year demand. This fundamental health is filtering directly into analyst models, driving a steady stream of upward revisions for Q3 and future quarters, as the following chart highlights.
Image Source: Zacks Investment Research
Crucially, these favorable revision patterns are not a new development; they extend a tailwind that has been building for nearly a year. Historically, these upward adjustments were tightly concentrated in Technology and, more recently, Energy, following Middle East supply disruptions. However, for Q3 2026, the constructive estimate revisions have broadened significantly, rising across 8 of the 16 Zacks sectors—including Transportation, Finance, Aerospace, Industrials, Utilities, and Construction, alongside Tech and Energy.
As would be expected, estimates for full-year 2026 are also going up, as the chart below shows.
Image Source: Zacks Investment Research
The Magnificent 7 Earnings PerformanceMicrosoft (MSFT - Free Report) and Amazon (AMZN - Free Report) became the latest "Magnificent Seven" members to deliver results that earned market applause, following Alphabet’s (GOOGL - Free Report) blowout report earlier in the cycle. All three tech giants remain deeply committed to building out generative AI infrastructure—an ongoing multi-billion-dollar CapEx push that has occasionally sparked broader market anxiety over ROI timing.
Cloud segment performance has emerged as the definitive barometer for whether these aggressive AI outlays are yielding tangible commercial returns. On that front, all three hyperscalers delivered robust top-line momentum, led by Alphabet’s standout, industry-leading acceleration.
With Q2 results from 6 of the Mag 7 members out already (Nvidia reports results on August 26th), earnings for the group are on track to be up +85.5% from the same period last year on +27.5% higher revenues. This growth pace reflects actual results for the 6 Mag 7 members that have reported with estimates for the still-to-come Nvidia report.
Image Source: Zacks Investment Research
Keep in mind that the group’s blockbuster Q2 tally has benefited from Alphabet’s non-operating unrealized gain on its SpaceX stake, which accounted for an estimated $77.4 billion in the company’s $112.1 billion net income. The Q2 earnings growth pace for the Mag 7 group becomes a relatively more ‘reasonable’ +30.3% once Alphabet’s non-operating unrealized gain is stripped out.
The chart below shows the Mag 7 group’s earnings and revenue growth on a calendar year basis.
Image Source: Zacks Investment Research
Importantly, the Mag 7 group has consistently enjoyed a steadily improving earnings outlook, with analysts raising their estimates, as the chart below shows.
Image Source: Zacks Investment Research
It is useful to keep in mind that the Mag 7 group is on track to bring in more than 28.9% of all S&P 500 earnings this year, up from 16.4% of the total in 2020. The group accounts for 33.7% of the index’s market capitalization.
Q2 Earnings Season ScorecardThrough Friday, August 7th, we have seen quarterly results from 444 S&P 500 members, or 88.8% of the index’s total membership. Total earnings for these companies are up +42.2% from the same period last year on +14.8% revenue gains, with 82.7% of the companies beating EPS estimates and 76.4% beating revenue estimates.
The comparison charts below put the Q2 earnings and revenue growth rates for these index members in a historical context.
Image Source: Zacks Investment Research
The comparison charts below put the Q2 EPS and revenue beats percentages in a historical context.
Image Source: Zacks Investment Research
The unusually strong earnings growth rate of +42.2% and revenue growth of +14.8% are benefiting from Micron (MU - Free Report) and Alphabet’s (GOOGL - Free Report) blockbuster results.
The chart below shows the reported Q2 earnings growth pictures, with and without Alphabet and Micron.
Image Source: Zacks Investment Research
The Q2 reporting cycle starts winding down this week, with 7 of the 16 Zacks sectors having reported all of their results, including Energy, Autos, Construction, Basic Materials, Utilities, and others.
This week’s line-up includes more than 600 companies, including 11 S&P 500 members. Notable companies reporting this week include Berkshire Hathaway, Applied Materials, Cisco Systems, Tapestry, and others.
The Earnings Big PictureThe chart below gives you a big-picture view of the overall earnings picture. It highlights current Q2 expectations right alongside actual results from the past four quarters and forecasts for the next four (including 2026 Q2).
Image Source: Zacks Investment Research
As you can see here, total S&P 500 earnings for 2026 Q2 are expected to increase by +43% compared to the same period last year on +15.2% higher revenues.
Of the 16 Zacks sectors, 13 are expected to have positive earnings growth in Q2, with Energy (earnings growth of +142.8%), Tech (+94.6%), Basic Materials (+52.3%) and Finance (+21.5%) as the major growth drivers.
Q2 earnings growth drops to +18.3% from +40.8% once the Tech sector’s substantial contribution is excluded.
The +142.8% earnings growth for the Energy sector is meaningful, but aggregate earnings growth would still be +38.6% on an ex-Energy basis.
The Tech sector has been a pillar of earnings growth over the last two years, and the sector is expected to continue playing that role in Q2 and beyond. The chart below shows current earnings and revenue growth expectations for the sector relative to what the sector actually reported in the preceding two periods and what is expected in the following three quarters.
Image Source: Zacks Investment Research
The Tech sector is unlike the other 15 Zacks sectors, as it alone brings in 41.6% of all S&P 500 earnings and accounts for 46.3% of the index’s total market capitalization.
As noted earlier, Alphabet’s Q2 results included a huge boost from a non-operating side, specifically the unrealized gain it has been forced to book on its SpaceX stake following that company’s IPO. Alphabet isn’t alone in having an outsized impact on the sector’s growth pace, as Nvidia and Micron are also exerting an outsized influence.
Excluding the contribution from Alphabet, Micron and Nvidia, Q2 earnings for the rest of the Zacks Tech sector would be up +32.7% (vs. +94.6% otherwise).
The chart below shows the Tech sector’s earnings growth picture, with and without these three companies.
Image Source: Zacks Investment Research
The chart below shows the aggregate growth picture for the S&P 500 index on a calendar year basis.
Image Source: Zacks Investment Research
As with Q2 expectations, the Tech sector has an outsized impact on the annual earnings picture as well. Total Tech sector earnings are expected to increase +51.3% from the same period last year on +18.3% higher revenues.
Excluding the Tech sector’s substantial contribution, total S&P 500 earnings for the year would be up +14.6% (vs. +27.1% otherwise).
As we saw with Q2 expectations, contributions from Alphabet, Micron, and Nvidia are also significant here, as the chart below shows.
Image Source: Zacks Investment Research
The way to read this chart is that the +27.1% earnings growth expected in 2026 drops to +14.6% once the Tech sector is excluded and +16.7% once only Alphabet, Nvidia, and Micron are excluded from the index.
For a detailed view of the evolving earnings picture, please check out our weekly Earnings Trends report here >>>> Earnings Picture Remains Robust: A Closer Look
SK Hynix (SKHY) is about to invest 54 trillion won ($38.1 billion) to build two new memory chip fabrication plants in South Korea as it expands production capac
Micron Technology (MU), a memory and storage semiconductor leader riding the AI infrastructure boom, delivered another blockbuster quarter, yet its shares slipp
Micron (MU) and SanDisk (SNDK) remained under pressure on Friday as investors continued pulling back from memory-chip stocks following a weaker outlook from San
Investors just experienced one of the most volatile weeks in the stock market this year.
On July 29, the Nasdaq Composite closed in a correction -- down 10.1% from its all-time high as investors digested Alphabet's increased capital expenditure (capex) spending on artificial intelligence (AI) and braced for upcoming earnings reports from Microsoft, Meta Platforms, Amazon, and Apple.
Just four trading sessions later, as of the market close on Aug. 4, the Nasdaq Composite recovered a staggering 8.8%, and the S&P 500 closed at an all-time high -- fueled by encouraging earnings reports from Amazon and Microsoft.
Over that period, the Vanguard Information Technology ETF (VGT +1.26%), which mirrors the tech sector, gained 11%. Here's why tech stocks are surging, and why the Vanguard Tech ETF remains an excellent buy for growth investors.
Image source: Getty Images.
Dynamic dominance If you had invested in the technology sector 10 years ago, you would have quintupled your money. In fact, the gains in the tech sector have impacted the S&P 500 to such a wide margin that tech is the only sector to have outperformed the index over the past decade.
^IXT data by YCharts
But those gains are in the past. Folks looking for opportunities to invest their hard-earned savings care more about future potential. And what makes the tech sector unique is that it doesn't depend on a single catalyst.
In just the past decade, several themes have driven the sector to new heights. Notable paradigm shifts include the push toward e-commerce, with transactions, communications, and work increasingly done online and on mobile devices. The tech sector has been front and center in the software-as-a-service, cloud computing, and artificial intelligence (AI) boom.
Those themes have benefited different industries within the tech sector at different times. There have been multi-year periods when semiconductor stocks were in a cyclical downturn, and periods when semiconductors have contributed the vast majority of sectorwide gains -- which is the period we're in now. Similarly, software was the hottest industry for years, and lately, it has been dragging down the sector.
Among the most valuable tech stocks by market value, Apple was crushing Nvidia and Microsoft year to date but is down since reporting earnings, while Microsoft and Nvidia are up big in just four sessions.
MSFT data by YCharts
Investing in a tech-sector ETF provides exposure to companies driving sectorwide gains, which have historically far outpaced the declines of laggards. While not a perfect solution, it does ensure that investors don't become overly concentrated in just one or two themes within the tech sector and leaves room for breakout potential from hidden-gem stocks.
Microsoft is back in favor Microsoft is perhaps the best example of how sentiment can turn on a dime and why investors are better off building their portfolios around quality companies than getting caught up in whatever companies are in or out of favor.
Leading up to its July 29 earnings report, Microsoft was under pressure amid a broader sell-off in software stocks, driven by AI disruption fears and rising cloud infrastructure capex. But Microsoft proved the doubters wrong with impressive growth and upbeat fiscal 2027 guidance, including positive free cash flow in the upcoming fiscal year despite rising spending.
Microsoft gained 26.1% in just four sessions -- or a mind-numbing $757 billion in market value. That's like creating a company with a value equivalent to Advanced Micro Devices in less than a week, and AMD is one of the 20 most valuable S&P 500 companies.
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Some stocks are worth premium valuations One-third of the Vanguard Tech ETF is invested in just four stocks -- Nvidia, Microsoft, Micron, and Broadcom. Big gains in those megacap names have helped drive the ETF higher in recent sessions,even after accounting for a significant decline in Apple.
Some investors may be concerned that the tech sector is overbought and ripe for a pullback. Or that growth potential is already priced in, given investor enthusiasm. Those concerns are certainty warranted, given the Vanguard Tech ETF's 36.2 price-to-earnings (P/E) ratio as of June 30. But looking at a single valuation metric such as P/E ratios or simply the price action on a chart misses the most important reason the Vanguard Tech ETF remains an excellent buy now -- which is earnings growth.
Earnings growth is the most powerful force in investing. It can make even the most expensive stocks look cheap in the long run. A company with a 40 P/E that can grow earnings by 20% to 30% per year over the long term is a better value than a company with a 20 P/E with a single-digit earnings growth rate.
Microsoft and Apple are growing earnings at their fastest rates in years. Despite difficult comps, Nvidia and Broadcom continue to grow at impressive rates, justifying their valuations. Supply constraints on memory chips have contributed to massive earnings growth in Micron Technology (MU -1.21%) and other memory stocks.
These are just some of the many examples of tech stocks that have rewarded patient investors with big gains but could still be good buys now.
A sector built around quality companies With a reasonable 0.09% expense ratio, or $0.90 for every $1,000 invested, the Vanguard Information Technology ETF offers investors a low-cost way to get exposure to a basket of hundreds of tech stocks. However, it's worth noting that the sector's performance is heavily dependent on a handful of names, as Nvidia, Apple, Microsoft, Micron, Broadcom, and AMD account for over half of the ETF.
Concentration is a double-edged sword, as it can amplify gains when a big-name component such as Microsoft stages a rapid rebound, but it can also lead to rapid downturns if a key industry such as semiconductors sells off. Therefore, investors should consider the Vanguard Tech ETF only if they have a high risk tolerance and a long-term investment horizon to withstand prolonged volatility.
Shares of SK Hynix (NASDAQ:SKHY) are down 5% to $136.79 midday Friday after the company’s board approved roughly $38 billion to build two new memory fabs in South Korea. The muted reaction ties back to the sheer scale of the capital spending, plus a decision to defer the next shareholder-return update to the third quarter.
The broader memory complex is moving unevenly. Seagate Technology (NASDAQ:STX | STX Price Prediction) stock is down 7% to $797.09 despite no clear company-specific catalyst, while Micron Technology (NASDAQ:MU) stock is down 2% to $866.80 and SanDisk (NASDAQ:SNDK) shares are down 3% to $1,225.15.
The Roundhill Memory ETF (CBOE:DRAM) is down 2% to $50.37, and the fund is a useful barometer given how uneven the pullback has been across memory and storage names.
The $38 Billion Fab Approval SK Hynix’s board green-lit 54 trillion won for two new fabs: a DRAM plant known as Yongin Y2 at roughly 35.2 trillion won, and a NAND flash plant known as Cheongju M17 at roughly 19.1 trillion won. About two-thirds of the outlay is aimed at DRAM, aligning capacity with AI-driven memory demand.
SK Hynix’s management pulled forward the broader Yongin cluster timeline, aiming to finish all four planned Yongin fabs by 2033 rather than 2045. Furthermore, SK Hynix’s CEO has publicly warned that 2027 could bring the most severe memory shortage the industry has ever seen, framing demand as a structural shift rather than a cyclical bounce.
SK Hynix stock listed on the NASDAQ exchange on July 10, and Seoul-listed shares closed down 5% ahead of the U.S. session. The company also posted record Q2 2026 operating profit up 557% year over year (YoY), though the report still missed analyst estimates on revenue.
Seagate Leads the Decline Without a Catalyst Seagate stock is the worst performer in the group, and there’s no visible company-specific news to explain the move. Seagate shares were up 210% year to date (YTD) heading into Friday, so today’s 7% giveback looks like profit-taking after a vertical run.
Seagate’s late-July print delivered a beat on revenue and non-GAAP EPS, with guidance for Q1 FY2027 revenue of $4.1 billion plus or minus $100 million. Nothing in that setup meaningfully changed today, which supports the read that traders are trimming their exposure after a big move higher.
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Micron and SanDisk Hold Up Better Micron stock is only down 2%, a notable divergence given the sector’s news flow. Micron’s multi-year Strategic Customer Agreements and dominant HBM4 position appear to be insulating Micron shares from the capex-driven anxiety hitting SK Hynix.
SanDisk stock is down 3% after the company reported blowout Q4 FY2026 results on August 5, with revenue up 371.6% YoY. SanDisk shares are still up 419% YTD, so a modest pullback in the wake of an earnings-driven melt-up is unsurprising.
The Roundhill Memory ETF concentrates heavily in a handful of names: Samsung Electronics at 24.99%, SK Hynix Inc at 24.22%, and Micron Technology Inc at 23.83%. That concentration cuts both ways, and investors should consider keeping their position sizes modest if they use the DRAM ETF as a proxy for the theme.
What to Watch The bull case for SK Hynix rests on management’s view that memory heads into a structural shortage in 2027, with HBM demand from AI accelerators giving SK Hynix durable pricing power. If SK Hynix delivers a Q3 2026 shareholder-return update that pairs the heavy capex with meaningful buybacks or dividends, the market may look past near-term dilution risk.
The bear case is that $38 billion in new SK Hynix Hynix fab investment lands as memory stocks trade near record highs, potentially seeding oversupply worries for 2027 and beyond. Investors can watch for analyst reactions to the fab plan and Micron’s next earnings report, scheduled for September 28.
The takeaway: today’s move looks like uneven profit-taking rather than a sector-wide fundamental break. Traders may want to check for whether Seagate stock stabilizes into the close and whether the DRAM ETF holds $50, since a break there could pull in more sector-wide selling next week.
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Micron Technology Inc. (MU, Financials), the memory-chip maker, received a lower price target from Citi as the firm warned that one of the industry's strongest
Micron Technology MU shares fell more than 1.8% on Friday as investors weighed fresh investment plans from South Korean memory chip maker SK Hynix alongside a more cautious outlook for memory pricing from Citi.
The memory-chip maker has declined about 9% over the past month, although the stock remains up more than 660% over the past 12 months.
Investor attention remains focused on when memory chip supply will catch up with surging demand driven by artificial intelligence infrastructure.
On Friday, SK Hynix said its board approved 54.3 trillion won ($38.15 billion) in investments for new chip fabrication facilities in South Korea.
The announcement follows even larger investment commitments made earlier this year.
In June, SK Hynix and Samsung said they would spend a combined 800 trillion won ($518.58 billion) to build new semiconductor manufacturing hubs in southwest Korea.
However, additional supply is not expected to arrive immediately.
Large semiconductor fabrication plants typically require years to construct.
Micron's own $100 billion manufacturing project in New York, announced in 2022, is not expected to begin production until 2030, while no major new memory manufacturing capacity is expected to come online until roughly next year, with additional capacity planned for 2028.
Citi lowered its price target on Micron to $1,150 from $1,400 while maintaining its Buy rating, reflecting a more moderate outlook for DRAM and NAND pricing over the coming quarters.
The bank reduced its valuation multiple to 8 times revised calendar-year 2027 earnings estimates from 10 times previously.
"We trim MU TP to $1,150 from $1,400 based on 8x P/E vs prior 10x times revised C27 EPS to reflect lower market multiples on mixed memory peer results," the Citi analyst wrote.
The revision followed meetings with memory supply chain participants and third-party experts during the "Future of Memory and Storage" conference.
"We see both DRAM and NAND prices decelerating Q/Q in the next four quarters with prices peaking in 2Q of next year," the analyst said.
Citi now expects DRAM prices to decline 3% in the second half of 2027 compared with its previous expectation for flat pricing.
NAND prices are projected to fall 5% during the same period. The firm also reduced its fiscal 2027 and 2028 earnings estimates by 1% and 2%, respectively.
The bank also expects Micron's profitability to moderate as pricing eases.
"We expect Micron's gross margins to decline from current mid-80s and sustain in mid-70s next year as prices decline from a high base with ~40% DRAM bits under LTA pricing contracts," the analyst wrote.
China expansion remains a longer-term concernBeyond near-term pricing, Citi identified expanding Chinese memory production as its biggest structural concern.
"China competition and capacity additions in both NAND and DRAM markets is the biggest risk to our thesis," the analysts said.
According to Citi, China's leading NAND producer YMTC plans to increase capacity by adding 50,000 to 60,000 wafer starts next year to its existing 200,000-unit capacity and aims to become the world's largest NAND manufacturer by 2030.
DRAM producer CXMT also plans to expand production from roughly 350,000 wafers to around 400,000 next year, with a longer-term target of approximately 600,000 wafers by 2030, although Citi noted that yields remain low.
While US export restrictions limit Chinese-made memory sales into the United States, Citi warned that competition could still affect Micron internationally.
"While US government is unlikely to allow made in China memory sales to US, sales to data centers in other regions like Europe could indirectly impact Micron," analysts wrote.
The world's largest technology companies are pouring unprecedented amounts of money into infrastructure as the artificial intelligence (AI) revolution shows no signs of slowing. Alphabet, Microsoft, Amazon (AMZN -0.14%), Meta Platforms, and Oracle are expected to make more than $700 billion in capital expenditures (capex) in 2026 alone.
What once looked like a temporary surge in spending has become a multiyear race to procure land, chips, and the components that power AI servers. As each quarter passes, capex numbers rise. The latest explanation from Amazon Chief Executive Officer Andy Jassy points to one overlooked bottleneck: memory.
Amazon CEO Andy Jassy. Image source: Amazon.
Breaking down Amazon's AI capex budget The trajectory of Amazon's infrastructure spending illustrates a broader pattern. In 2025, the company spent roughly $132 billion on capital projects. For 2026, Amazon raised its capex forecast from about $200 billion to $220 billion.
The bulk of this money flows through Amazon Web Services (AWS), which continues to expand as enterprises and developers demand more cloud capacity. Data center construction remains a major source of spending -- requiring new buildings, power infrastructure, and cooling systems across multiple continents.
Alongside physical facilities, Amazon is investing heavily in custom silicon designed to reduce reliance on external suppliers. Moreover, the company's satellite constellation, Project Kuiper, and its robotics and automation efforts in fulfillment centers also comprise meaningful allocations of the AI budget.
Taken together, these initiatives are changing what was once a cloud and retail spending plan into a more comprehensive industrial build-out aimed at capturing the next decade of digital and physical growth.
Don't ignore Jassy's remarks about AI memory Jassy explained the increase in capex on the company's second-quarter earnings call, saying:
We now believe we will spend approximately $220 billion in cash capex in 2026. The higher cost of memory is pushing this number up from our prior estimate of about $200 billion. Even at that amount, we will not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027. In fact, the demand we already have for 2028 is striking.
These comments are important because Jassy deliberately isolates memory pricing as a critical, multibillion-dollar cost driver rather than a secondary detail. High bandwidth memory (HBM) and advanced DRAM have become essential for training large language models and deploying inference at scale, as each new generation of AI accelerators consumes more of both.
When a hyperscaler of Amazon's caliber is forced to revise its capex budget higher because of memory costs, it confirms that demand for these specialized chips is outstripping supply by a wide margin. The implications for the broader AI memory market are straightforward: Pricing power remains with producers, and the memory supply shortage is expected to persist for at least another year, if not longer.
Why should Micron investors pay attention to Amazon? Jassy's remarks serve as a high-visibility confirmation of multiyear strength in demand for DRAM and HBM suppliers. Micron Technology (MU -1.31%) is one of the few producers capable of supplying these chips at scale.
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When the largest cloud services provider says that rising prices for memory added billions to its AI budget, it signals that customers are willing to pay more to secure scarce supply. These dynamics support higher average selling prices, widening gross margins, and stronger free cash flow for memory manufacturers such as Micron.
Smart investors understand that the same capacity constraints that are forcing Amazon to spend more also support the view that Micron's order book should remain robust well beyond the current year. Against this backdrop, Micron's growth prospects rest on secular rather than cyclical demand.
The combination of rising hyperscaler spending, memory chip shortages, and a multiyear demand cycle creates a clear runway that the memory sector has rarely enjoyed in prior boom-and-bust cycles.
For investors prepared to weather short-term volatility, the latest outlook from Amazon strengthens the case that Micron's business remains positioned to capitalize as the AI infrastructure boom accelerates. For this reason, Micron stock could serve as a complement to a buy-and-hold strategy alongside other chip stocks in an AI-themed portfolio.
Whether you love him or hate him, Elon Musk is one of the most influential executives in the world today. Not surprisingly, his first earnings call with SpaceX (SPCX +6.14%) was a highly anticipated event. While, as expected, he made some bold predictions and promises, there were a few clear non-SpaceX winners from the company's earnings call.
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The first big winner is Nvidia (NVDA -0.10%). Just before releasing its earnings report, SpaceX announced that it was teaming up with Nvidia to design the compute payload for its Starmind AI satellite. This will be SpaceX's first big test for its planned data center-in-space ambitions, and it will use both Nvidia's graphics processing units (GPUs) and central processing units (CPUs).
Elon Musk. Image source: Getty Images.
A prototype of the satellite is scheduled to be delivered early next year, with plans for mass production later in 2027. Meanwhile, Musk said the satellite would basically be an optimized Vera Rubin NVL72 computer and that it plans to use it both in orbit and on the ground.
More importantly, though, Musk declared on SpaceX's conference call that the company would use Nvidia's chips exclusively going forward. He said that Vera Rubin is the best architecture, and that Nvidia has the best AI computer.
While SpaceX isn't yet spending the same amount on AI infrastructure capital expenditure (capex) as the five big hyperscalers -- Amazon, Alphabet, Microsoft, Meta Platforms, and Oracle -- it could be in the next few years. After all, the $15.8 billion it spent on just AI capex alone ($18.4 billion in total) in the second quarter was not chump change.
Overall, the SpaceX news is a nice positive for Nvidia, and with the stock trading at a forward price-to-earnings (P/E) ratio of just 17 times fiscal 2028 analyst estimates, it's just another reason to buy this AI stock leader.
The memory makers
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When discussing memory on the call, Musk gave a short and simple reason why these stocks likely have a long runway of growth in front of them. The SpaceX CEO said:
Then look at the rate at which logic and memory is being produced. And one must always consider a limiting factor here. The limiting factor currently is memory. The memory output is increasing by around 20% per year. Now normally, that would be fantastically fast and amazing for any large, mature industry. But ask yourself: is the demand increasing by 20% a year. No, the demand is increasing by 200% a year, maybe higher. So, if you've got demand increasing much faster than supply, then Economics 101 would suggest that the price increases; it does not decrease.
Simply put, DRAM is currently very supply-constrained, and given the pace of demand versus supply, this situation is only going to get worse, and prices will continue to rise. That is great news for memory makers, especially SK Hynix (SKHY -4.97%) and Micron (MU -1.31%), which together with conglomerate Samsung have an oligopoly on the DRAM (dynamic random-access memory) space.
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SK Hynix is the biggest direct beneficiary from this. Demand for high-bandwidth memory (HBM), which gets packaged with GPUs to reduce latency, is the leading driver of DRAM demand. SK Hynix, meanwhile, is the main HBM provider to Nvidia and holds an over-50% market share. It also just signed a massive multiyear $500 billion deal to supply and co-develop next-generation memory specifically for Nvidia's Vera Rubin architecture. With its stock trading at a forward P/E of around 5 times, the longer this memory cycle lasts, the cheaper its stock looks.
Micron, meanwhile, is perhaps the biggest indirect beneficiary. With the big three DRAM makers focused on HBM, prices for ordinary DRAM and NAND (flash) have actually been rising faster than HBM prices. As such, trailing a bit in HBM has actually benefited the company, and current market conditions likely mean this will continue. With a similar valuation to SK Hynix, the stock looks more attractive the longer this memory supercycle lasts.
Micron (MU -1.31%), one of the world's largest producers of DRAM and NAND memory chips, was once considered a cyclical chip stock. Its growth was tethered to the memory chip market's boom-and-bust cycles, which usually occurred every few years.
But over the past 12 months, Micron's stock surged nearly 720%. What's driving that sudden momentum, and can it head even higher?
Image source: Getty Images.
Why is Micron's stock skyrocketing? In the past, Micron's growth was largely driven by the smartphone and PC markets. But over the past two years, the AI market's rapid expansion boosted its sales of high-bandwidth memory (HBM) DRAM chips and NAND (flash) memory chips for enterprise solid-state drives (SSDs).
Both types of memory chips directly feed data to the processors (including Nvidia's (NVDA -0.10%) GPUs) that power AI accelerator clusters in data centers. HBM chips handle the active GPU compute, while NAND chips expand the pipeline for bulk data transfers.
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As Micron pivots more of its production toward AI-driven memory chips, its fabs are running out of bandwidth to manufacture conventional PC, smartphone, and server chips. That shortage, which its industry peers also face, is driving up the prices of conventional DRAM and NAND chips. At the same time, demand for HBM and SSD chips continues to outstrip supply. That crunch is driving up the prices of all of its memory chips.
Micron's stock is soaring because the bulls believe this AI-driven supercycle will last much longer than its prior growth cycles. From fiscal 2025 (which ended last September) to fiscal 2028, analysts expect its revenue to surge more than sevenfold from $37.4 billion to $263.8 billion, while its net income soars from $8.5 billion to $182.0 billion.
Does Micron's stock still have more upside potential? Micron's growth potential is incredible, and its stock still looks undervalued at 12 times this year's earnings. By comparison, Nvidia -- which is expected to grow its revenue and earnings at a slower rate than Micron -- trades at 23 times this year's earnings. That lower multiple indicates the market hasn't fully revalued Micron as a high-growth AI stock.
Yet it still has plenty of irons in the fire. It's increasing its manufacturing capacity in the U.S., Taiwan, and Singapore, and it's locking its major enterprise customers into long-term strategic agreements through 2030 that feature fixed pricing bands with a high price floor. Those deals should shield its bottom line from any abrupt declines in memory chip prices. I believe these catalysts could drive Micron's stock even higher over the next 12 months.
Key Takeaways Micron, BrightSpring Health and Custom Truck One Source passed profitability-focused screening criteria. MU posted a 55.9% net profit margin and carries projected earnings growth of 791% this year.BTSG and CTOS pair positive net profit margins with strong earnings growth expectations. Historically, August has been a volatile month for the stock market, but this year it has relatively begun on a steady note. Banking on this optimism, investors should focus on companies that consistently generate strong profits after covering both operating and non-operating expenses.
These companies are generally better positioned to capitalize on favorable market conditions than those that incur losses. To assess a company’s profitability, investors often rely on profitability ratios, which help measure its ability to deliver consistent and sustainable earnings.
On that note, Micron Technology, Inc. (MU - Free Report) , BrightSpring Health Services, Inc. (BTSG - Free Report) and Custom Truck One Source, Inc. (CTOS - Free Report) stand out as leading profitable stocks, supported by strong net income ratios and promising growth prospects.
Why the Net Income Ratio Matters to Investors The net income ratio is a key indicator of a company’s overall profitability. It reflects the percentage of net income relative to total sales revenues. Using the net income ratio, one can assess a firm’s ability to cover operating and non-operating expenses with revenues. A higher net income ratio usually implies a company’s ability to generate sufficient revenue and manage all business functions effectively.
Stock Screening Criteria Used in Research Wizard The net income ratio is not the only indicator of future winners. So, we have added a few more criteria to arrive at a winning strategy.
Zacks Rank equal to #1: Whether the market is good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Trailing 12-Month Sales and Net Income Growth Higher than X Industry: Stocks that have witnessed higher-than-industry sales and net income growth in the past 12 months are positioned to perform well.
Trailing 12-Month Net Income Ratio Higher than X Industry: A high net income ratio indicates a company’s solid profitability.
Percentage Rating Strong Buy greater than 70: This indicates that 70% of the current broker recommendations for the stock are Strong Buy.
These few parameters have narrowed the universe of more than 7,685 stocks to only 13.
Here are three of the 13 stocks that qualified for the screening:
Micron Technology Micron Technology is a global provider of memory and storage products. MU’s 12-month net profit margin is 55.9%. Micron’s expected earnings growth rate for the current year is 791% (read more: 2 AI Infrastructure Stocks That Could Outperform NVIDIA).
BrightSpring Health Services BrightSpring Health Services provides home and community-based healthcare services in the United States. BTSG’s 12-month net profit margin is 2.6%. BrightSpring Health Services’ expected earnings growth rate for the current year is 78%.
Custom Truck One Source Custom Truck One Source provides specialty equipment rental and sales solutions for infrastructure industries across the United States and Canada. The company’s 12-month net profit margin is 1.1%. Custom Truck One Source’s expected earnings growth rate for the current year is 178.6%.
HomeIndustriesComputers/ElectronicsTech StocksTech StocksWhile Sandisk and Western Digital shares were down, Micron erased its intraday lossesAug. 6, 2026, 3:21 p.m. ET
Shares of Micron Technology were rising Thursday even as other memory-related stocks came under pressure.
Micron’s stock MU was up fractionally in Thursday afternoon trading, at last check, whereas they had been down as much as 5.6% earlier in the trading day. Meanwhile, shares of fellow NAND flash-memory maker Sandisk SNDK were off about 5% following the company’s Wednesday evening earnings report.
SanDisk Corp. (NASDAQ:SNDK) and Micron Technology Inc. (NASDAQ:MU) have been two of the most whipsawed stocks in the American market this summer. Their earnings expectations have continued to rise.
That divergence has produced a strange screen.
Rank the large-cap US technology universe by forward price-to-earnings, the share price divided by what analysts expect the company to earn over the coming twelve months, and the cheapest name on the list is SanDisk at 6.0 times.
The second cheapest is Micron at 6.3 times.
Both are also up triple digits this year.
Yet Wall Street now values them like businesses in decline.
The Cheapest Corner of Tech Looks Very DifferentLook at what surrounds them.
GoDaddy Inc. (NYSE:GDDY) trades at 8.6 times forward earnings after falling 28% this year.
Super Micro Computer Inc. (NASDAQ:SMCI) trades at 8.9 times and remains 75% below its record.
Adobe Inc. (NASDAQ:ADBE) sits at 9.9 times after dropping 27% this year. Gartner Inc. (NYSE:IT) trades at 11.7 times and remains nearly 69% below its all-time high.
Those are the multiples investors usually assign to businesses facing slowing growth, disruption or uncertainty related to artificial intelligence.
SanDisk and Micron are cheaper than them.
CompanyForward P/E2026 ReturnBelow All-Time HighSanDisk Corp.6.0x+444.4%-45.7%Micron Technology Inc.6.3x+216.1%-28.6%GoDaddy Inc.8.6x-28.2%-58.7%Super Micro Computer Inc.8.9x+3.4%-75.4%Cognizant Technology Solutions Corp.9.3x-32.4%-36.3%Gen Digital Inc.9.4x+0.5%-13.5%Adobe Inc.9.9x-26.7%-63.2%HP Inc.10.3x+26.7%-23.3%Gartner Inc.11.7x-27.9%-68.8%Source: KoyfinThe Market Doesn’t Believe Today’s Earnings Will LastThe arithmetic behind those six-times multiples is striking.
SanDisk is now expected to earn $214.32 per share over the next twelve months. Just three months ago, analysts were modeling roughly $168.
That means forward earnings estimates have risen 27.6% in only three months, even as the stock has retreated about 46% from its record.
Micron shows almost the same pattern.
Analysts now expect $144.21 per share over the next twelve months, up 26.7% from roughly $114 three months ago. Yet the stock trades 29% below its all-time high.
That combination matters.
The stocks are not becoming cheaper because Wall Street is cutting forecasts more slowly than prices are falling. They are becoming cheaper while Wall Street is still raising forecasts aggressively.
And that is where the trap may lie.
A low multiple on peak-cycle earnings is not necessarily a discount.
Memory has been among the most cyclical businesses in semiconductors. Historically, these stocks can look cheapest precisely when profits are closest to their peak.
Supply eventually catches demand. Memory prices fall. Earnings estimates follow.
A stock that appeared to trade at six times earnings can suddenly look far more expensive once the denominator collapses.
Why AI Could Break the Old Memory CycleWhat makes this cycle unusual is the visibility companies are trying to build around those earnings.
If AI keeps memory demand structurally tighter than previous technology cycles, the earnings investors currently consider temporary may prove more durable.
That would make 6 times earnings unusually cheap.
SanDisk said its new business model agreements — multi-year supply contracts with fixed or floored pricing — should cover more than half of shipped bits in fiscal 2027 and roughly two-thirds in fiscal 2028.
The agreements carry $16.5 billion in financial guarantees.
Micron, meanwhile, has guided its current quarter to roughly $50 billion in revenue, following $41.46 billion in the quarter just reported and also indicated sixteen long-term agreements through 2030.
The Real Question Behind SanDisk and MicronThat makes SanDisk and Micron perhaps the clearest valuation test in the AI market today.
Investors have already rewarded the memory shortage. SanDisk is up 444% this year and Micron 216%.
Yet their valuations suggest Wall Street still refuses to treat those profits as permanent.
The next leg of the trade therefore depends less on whether AI demand remains strong. It depends on whether AI has finally changed the economics of memory.
If it has, the cheapest stocks in technology may also be among its most misunderstood.
Image: Shutterstock
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The memory chip boom has been one of the most explosive stories of the year, and it might not be over with quite yet, even as some of the bears, like Dr. Michael Burry of The Big Short fame, stand by their shorts. With SK Hynix (NASDAQ:SKHY) joining the likes of Micron (NASDAQ:MU | MU Price Prediction) on the U.S. exchanges, investors have one more option to consider as a play on the global memory chip shortage.
SK Hynix and Micron have been major movers. But they might be too choppy to handle Even as Micron takes more market share, SK Hynix is still a force to be reckoned with, especially as it ramps and maintains its dominance in the high-performance memory (HPM) scene.
With the Nvidia (NASDAQ:NVDA) partnership in place and a stranglehold on the HPM market, perhaps there is no touching SK Hynix as the South Korean firm looks to sell out even more of its capacity as AI demand looks to stay hot until 2030 and maybe even a bit beyond. Any way you look at it, SK Hynix’s top boss sounded pretty upbeat about the structural shift going on in the memory market.
Of course, investors should take the words of a CEO with a fine grain of salt.
At the end of the day, the memory plays do not come without their own fair share of risks. If a stock can double up many times over in just a year, you can bet that it can implode by an equally devastating amount, and it might not take a confirmation of deteriorating AI demand to cause such a nasty sell-off.
The latest plunge in semis, which saw memory chip makers get caught at ground zero, was absolutely vicious, but healthy, especially given the run in the rearview.
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iShares MSCI South Korea ETF For investors looking to bet on memory while going above and beyond Micron, perhaps the iShares MSCI South Korea ETF (NYSEARCA:EWY) is worth a closer look this August. There’s no doubt that the ETF is heavily weighted in the two top memory makers, SK Hynix and Samsung (they account for north of 40% of the fund), the latter of which hasn’t yet arrived in the U.S. markets.
Arguably, Samsung might be the less-appreciated relative value play in the memory pool. And until the name has a U.S. IPO of its own, perhaps going down the route of the iShares MSCI South Korea ETF isn’t the worst idea in the world. Samsung is spending a fortune to expand its HBM capacity, and while the legendary South Korean conglomerate is far from a pure play on the memory boom, I still think it’s a diversified titan that’s still way too cheap to ignore.
The memory correction has weighed quite heavily on the South Korean stock market, with the iShares MSCI South Korea ETF still down more than 22% from its peak hit back in June.
The bottom line If this isn’t it for the memory firms, perhaps the dip is worth exploring further, especially for investors still interested in betting on the boom with a discount — the South Korean discount, but with a bit of diversification across other corners of the heated South Korean market. Indeed, it’s not all about memory. It plays just shy of half of the pie. As for the other half, a mix of financials (banks), industrials, autos (Hyundai/KIA), and more are being thrown in.
Either way, the South Korean market itself looks like it’s overdue for a bounce, and as a great backdoor to play the memory boom, I’d encourage investors to stash the ETF on their radar if they’re looking for a cheaper, less-terrifying way to play the strength.
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Artificial intelligence has transformed the semiconductor industry into a game of bottlenecks. First it was GPUs. Then networking. Today, memory has become one of the industry’s biggest choke points, with high-bandwidth memory (HBM) in particularly short supply.
Just months ago, investors couldn’t buy memory stocks fast enough, pushing companies like SK Hynix (NASDAQ:SKHY), Micron Technology (NASDAQ:MU | MU Price Prediction), and Sandisk (NASDAQ:SNDK) to record highs as AI spending accelerated. Now the mood has flipped. Despite one record quarter after another, investors have decided that simply beating expectations is no longer enough — and that shift in psychology is driving today’s sell-off more than anything happening inside the companies themselves.
Expectations Have Outrun Outstanding Results The numbers themselves don’t suggest an industry in trouble.
At the end of July, SK Hynix generated the strongest financial results in its history, with revenue climbing 257% year over year while operating profit surged 557%. Yet the stock has continued falling and is down another 8.6% at the market open today. Micron experienced the same treatment earlier this summer. The company delivered record quarterly revenue in June while raising guidance above Wall Street expectations. Instead of rewarding the performance, investors have pushed the stock down roughly 32% since then. Sandisk told a similar story yesterday. The flash memory specialist reported a record quarter yesterday, but the stock is plunging 12% this morning. Investors aren’t selling because earnings are weak. They’re selling because their expectations ran far ahead of the results.
Ironically, those extraordinary conditions created impossible comparisons. Today, a beat-and-raise quarter no longer satisfies the market. The raise itself now has to suggest another leg of exponential growth, even when management’s outlook already exceeds Wall Street forecasts. Anything short of perfection is treated as evidence that the AI cycle is peaking.
That concern isn’t entirely misplaced. Memory has historically been among the semiconductor industry’s most cyclical businesses. Manufacturers eventually expand production, supply catches up with demand, pricing weakens, and margins compress. Investors know buying at the top of that cycle has historically produced disappointing returns, so today’s selling suggests many believe that peak is approaching.
The Cycle May Last Longer Than Investors Expect Granted, memory remains cyclical. That hasn’t changed. What may have changed is the duration of this cycle.
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Capacity expansion isn’t something that happens over a few quarters. Building fabrication plants, qualifying production, and ramping advanced HBM manufacturing takes years. Meanwhile, AI infrastructure demand continues climbing as hyperscalers expand data centers and each new generation of AI hardware requires more memory than the last.
Memory also isn’t the only bottleneck. Power availability, cooling systems, optical networking, advanced packaging, and electrical infrastructure all remain constraints that technology companies are working through simultaneously. Those bottlenecks naturally stagger AI deployments, extending demand rather than eliminating it.
That gives memory suppliers a longer runway than investors currently appear willing to recognize.
Key Takeaway In short, today’s memory stock rout says more about investor psychology than deteriorating fundamentals.
SK Hynix, Micron, and Sandisk continue posting financial results that would have sent their shares sharply higher just six months ago. Instead, the market has decided expectations should grow faster than already-record profits.
That doesn’t mean investors should rush to buy every decline. Crowd psychology can keep cyclical stocks under pressure long after fundamentals remain intact. But for sharp investors willing to build positions gradually, this sell-off may ultimately prove to be less the end of the AI memory boom than an opportunity created by expectations that temporarily ran ahead of reality.
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Micron Technology (NASDAQ:MU | MU Price Prediction) has become the memory trade of the AI era. Shares are up 190.81% year to date and 692.19% over the past year, with Q3 revenue hitting $41.46 billion, up 345.72% YoY.
CEO Sanjay Mehrotra told investors “AI has not just increased demand for memory; it has fundamentally recast memory as a defining strategic asset in the AI era.” With shares at $829.50, can Micron reach $1,500 by 2028? Here’s the math.
Why Micron Shares Are Stuck Below $900 Right Now The near-term price action is ugly despite strong fundamentals. MU is down 7.85% over the past week and 14.96% over the past month, pulling back from a June peak above $1,087.
A beta of 2.14 means MU trades like a levered bet on sentiment, and any wobble in AI capex expectations gets amplified. The composite sentiment index sits at 38.17, technically bearish, and insiders are net sellers after the vertical run. The market is digesting one of the fastest re-ratings in semiconductor history.
Wall Street Sees 83% Upside. Our Base Case Says 9% The consensus is loud. Nine strong buys, 31 buys, four holds, and one strong sell produce an 89% bullish reading and a mean target of $1,522.26. Our model is far more measured.
The base case for 2028 is $905.44, or 9.15% upside, with a bull scenario of $1,327.53 and a bear at $662.58. Confidence is 90%. Analysts may be right on direction, but they are anchoring off peak-cycle EPS. Getting to $1,500 requires the cycle to stay tighter for longer.
The Path to $1,500 Per Share by 2028 Reaching $1,500 from today’s price of $829.50 would require an 80.8% gain. With forward EPS of $64.92, a price of $1,500 implies a forward P/E of 23x. Our base case of $905.44 already implies 18x, meaning the bold target requires roughly 5x additional multiple expansion.
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That is achievable if EPS keeps compounding. Micron’s Q4 guide is $31 in non-GAAP EPS on $50 billion in revenue, and Mehrotra has said “we expect industry DRAM bit shipments in calendar 2026 to grow in the low-twenties percentage range” with supply staying tight.
Key catalysts: HBM4E volume production in calendar 2027, the first five-year Strategic Customer Agreement, and data center bits exceeding 50% of industry TAM for the first time. The risk: memory is cyclical, and a demand air pocket in 2027 would compress the multiple hard.
Where Micron Trades Today vs Its Earnings Power Current forward P/E of 13x is cheap for a business growing EPS this fast. Shares sit 21% below the 52-week high of $1,254.81 and light years above the $106.58 low.
The 10-year return of 5,759.45% tells you memory cycles reward patient holders when supply discipline holds. At today’s multiple, the market is pricing in sharp EPS reversion. If that reversion is milder than feared, re-rating alone gets you halfway to the bold target.
Is $1,500 Realistic? My Verdict Reaching $1,500 by 2028 requires an 80.8% gain and a forward multiple of 23x. It is a stretch above our base case, but not a fantasy.
Three things need to go right: HBM4E ramps on schedule in 2027, Strategic Customer Agreements insulate pricing through the next downturn, and free cash flow keeps compounding off the $18.30 billion Q3 base. A sharp memory oversupply in late 2027 would derail it. We’ve outlined the blueprint for how Micron Technology could reach $1,500 in 2028.
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Micron Technology (MU +0.06%) designs and manufactures high-performance memory and storage solutions, with a particular focus on DRAM, NAND, and high bandwidth memory (HBM) that power everything from smartphones to the data centers driving artificial intelligence (AI) workloads.
Throughout 2026, Micron stock has soared on the back of unprecedented demand for memory chips as hyperscalers race to secure scarce supply. During the first half of the year, shares of Micron tripled before hitting an all-time high in late June. Then stock fell 26% from its peak and spent the last month recovering some of the lost ground.
Investors are now asking whether this pullback marks the end of Micron's rally or a rare chance to buy the dip.
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Why is Micron stock plummeting? Micron's decline has little to do with any sudden weakness in the AI memory market. Demand remains robust, with industry shortages expected to persist into 2027 and Micron's own capacity sold out under multiyear supply agreements. Instead, the sell-off largely reflects profit-taking after an extraordinary run, combined with anxiety about the memory industry's historically cyclical nature.
Investors fear that Chinese competitors could ease supply constraints or that the hyperscalers may moderate their capital expenditure (capex) budgets if returns on AI infrastructure investments disappoint. Although these concerns are understandable given past boom-and-bust memory chip cycles, I think they are overstated relative to current fundamentals. Pricing power remains intact, gross margins are climbing into the mid-80% range, and supply remains tight. In my eyes, Micron's price slump looks more like a healthy digestion of gains rather than concrete evidence that the AI memory story is flawed.
MU Revenue (TTM) data by YCharts
What did Tim Cook just say about memory prices? During Apple's recent earnings call, Chief Executive Officer Tim Cook noted that the company was expecting to pay "significantly more" for memory in the June quarter than in March, and that is exactly what occurred. He added that memory costs will be "even higher" in the current quarter.
Apple CEO Tim Cook. Image source: Apple.
These remarks signal that pricing pressures are not a temporary spike but rather a sustained reality driven by demand outstripping supply. For Micron, which supplies both conventional DRAM and the specialized HBM for AI accelerators, Cook's commentary is unambiguously positive.
Rising costs for major customers translate directly into higher average selling prices and expanded profit margins for producers. Far from signaling weakness, Cook's candor underscores that the three dominant memory makers -- Micron, Samsung, and SK Hynix -- are operating in a seller's market.
Should you buy the dip in Micron stock? Given the persistent rise in memory prices that Cook highlighted, Micron has a realistic chance of surprising to the upside in its next earnings report. At a forward price-to-earnings (P/E) multiple of roughly 5.3, Micron stock trades at a fraction of the multiples commanded by other AI chip beneficiaries -- even as revenue expands by triple-digit percentages year over year and is expected to continue climbing.
When elevated growth meets rising prices and a valuation that already reflects cyclical skepticism, Micron's recent decline looks more like an opportunity than a warning. Investors willing to see past near-term volatility and focus on the multiyear memory shortage may view Micron's current price as attractive rather than a reason to run for the hills.
Allspring Growth Fund outperformed the Russell 3000 Growth Index during the quarter. Sandisk Corp. is riding the AI storage super-cycle. Shares of Cencora could not distribute in a 'risk-on' market.
In Amazon's 2026 second-quarter earnings call on July 30, CEO Andy Jassy forecast that capital expenditures would likely reach $220 billion for the year. That's up from a previously expected $200 billion, which was attributed to higher memory costs.
Still, Jassy said that increasing spending on artificial intelligence (AI) infrastructure may not be enough to keep up with demand:
Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027, too. In fact, the demand we already have for 2028 is striking.
Seemingly, that would be good news for Micron Technology (MU +0.06%), as its high bandwidth memory offerings play a key role in AI infrastructure, showing that even at higher prices, demand is likely to remain strong.
The Micron stock price, however, didn't benefit after Amazon reported earnings, dipping 5.9% from $874.66 on July 30 to $823.03 on July 31.
Image source: The Motley Fool.
Why the Amazon news didn't move the needle The most likely reason Amazon's increase in capital expenditures didn't help Micron's stock price was that the stock had already rallied, climbing 18.3% from the July 29 closing price of $739 to the July 30 closing price of $874.66. What helped was Samsung Electronics' announcement that strong earnings and forecasted memory chip shortages would persist through 2028.
Broadly, that was bullish news for Micron, which had been suffering a sell-off alongside the rest of the memory chip sector before Samsung's earnings announcement.
In the background, what could also have been weighing on sentiment around Micron is interest rate hikes. The Federal Open Market Committee decided to leave interest rates unchanged on July 29, but three members dissented and favored a quarter-point rate hike. Some investors may have started selling their tech stocks in anticipation of future rate hikes.
Finally, when Micron's shares shot up more than 18% on July 30 and regained some ground, there may have been some profit-taking on July 31. As of this writing, over the last 12 months, the Micron stock price is up more than 660%.
Today's Change
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0.06
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0.52
Current Price
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893.19
Micron's business model is shifting Despite the boon AI has been for Micron, there are still fears that, when supply catches up with demand, Micron and other memory stocks will return to a cyclical boom-or-bust pattern.
In that regard, supply is still not expected to catch up to demand until at least 2028. But if that milestone arrives earlier than anticipated, Micron is preparing itself. The company is locking in long-term deals, which may impact margins but offer more predictable cash flow. In Micron's fiscal 2026 Q3 earnings call, it announced that it had signed 16 strategic customer agreements and had $22 billion in cash deposits and related financial commitments.
Micron may still have a few more years with higher margins for its memory and storage offerings, as supply isn't expected to catch up with demand any time soon. Despite the recent sell-off, Micron is likely to continue to do well over the next two years. After that, however, there may be an adjustment period as it shifts to more reliable revenue with lower margins through long-term contracts.
Ultimately, an investment in Micron depends more on the deals it's locking in for long-term revenue, on whether it executes on becoming less known for cyclical results, and on whether the market appreciates its business model shift.
Nvidia, Micron and AMD slipped in US pre-market trading on Thursday after SanDisk’s outlook triggered a retreat across artificial-intelligence and memory-chip shares.
At 5.30am ET, Nvidia was slightly lower, Micron had fallen 3.3% and AMD was down 1.9%, while SanDisk tumbled more than 9%.
Nasdaq 100 futures declined 0.4% as investors reassessed valuations across an overcrowded semiconductor trade.
The contradiction was clear. SanDisk comfortably beat quarterly revenue and earnings forecasts, but its September-quarter guidance failed to clear the higher expectations created by a 469% rally this year.
SanDisk reported fiscal fourth-quarter revenue of $8.97 billion, ahead of the $8.48 billion FactSet consensus.
Adjusted earnings reached $39.25 a share, compared with expectations of $34.96, while data-centre revenue rose to $2.98 billion.
The disappointment came from the outlook. Management forecast September-quarter revenue between $10.3 billion and $10.8 billion.
Its $10.55 billion midpoint fell below Wall Street’s estimate of about $10.8 billion, while adjusted earnings guidance of $44 to $46 offered little additional upside.
That would normally count as a strong forecast. For SanDisk, investors wanted another dramatic increase capable of forcing earnings estimates substantially higher.
As per analysts, the market is being driven more by sentiment than by how strong a company’s earnings or guidance actually are.
Wedbush analyst Matt Bryson remains constructive. He expects earnings momentum to continue through fiscal 2027 and 2028 because industry capacity additions remain limited and multiyear customer agreements provide better visibility.
Micron was the most logical casualty because its business overlaps closely with SanDisk’s memory-cycle exposure.
SanDisk focuses on NAND flash, while Micron sells NAND, DRAM and high-bandwidth memory. Both have benefited from restricted supply, higher prices and AI data-centre investment.
Thursday’s pressure also followed a steep Asian semiconductor decline led by Samsung Electronics and SK Hynix.
That reinforced the impression that investors were cutting positions across crowded memory trades rather than reacting only to SanDisk.
The move does not prove the cycle has peaked. Micron delivered record results in June and has secured long-term customer commitments as buyers compete for supply.
Morgan Stanley analyst Joseph Moore wrote that there was “no quick fix to the memory shortage.”. He believes constraints could persist for another two to three years, or longer.
Nvidia’s modest decline appeared to reflect broad sector de-risking and profit-taking.
The shares gained 3.4% on Wednesday after Elon Musk said SpaceX would rely exclusively on Nvidia chips, giving traders an obvious opportunity to lock in gains.
AMD entered Thursday in a weaker position. Its shares had already fallen 7% on Wednesday after record revenue and an above-consensus outlook failed to offset disappointment over a flat 56% third-quarter gross-margin forecast.
Aptus Capital Advisors portfolio manager David Wagner called AMD’s reaction a classic “sell the news” event in comments to MarketWatch.
William Blair analyst Sebastien Naji said AMD still had “much to prove” and faced a high execution bar as Helios ramps.
SanDisk’s August 13 investor day now becomes the next sector test, as management must show that customer contracts and AI-storage demand can support earnings beyond the present shortage.
Sektor výrobců pamětí zůstává jedním z klíčových hybatelů indexů i nálady na trzích. Reportované výsledky přitom náladu srážejí dolů. Sandisk po výsledcích propadá a to samé platí pro Western Digital, načež se přidávají také klíčová jména jako SK Hynix, Samsung a Micron.
Článek se odemkne 06.08.2026 12:26
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Micron's (MU +0.06%) rally caught most investors by surprise. It quickly turned from a small AI play to a $1 trillion company. The stock has almost tripled this year, but it's down sharply due to a broad correction among AI stocks.
The stock is starting to rebound and recently crossed $900 again, but it's still trading at an incredible bargain. Here's why Micron looks compelling below $1,000 per share.
Image source: Getty Images.
Eye-popping growth is set to extend into multiple years It's hard to find a company that quadrupled its revenue year over year and set the tone for more than 20% in projected sequential revenue growth in its upcoming fiscal 2026 fourth quarter. Micron did just that when it released earnings for its fiscal 2026 third quarter.
Today's Change
(
0.06
%) $
0.52
Current Price
$
893.19
Some bears have expressed concerns that the AI momentum will eventually slow. The fears are logical due to the history of boom-and-bust cycles for memory chips. Furthermore, the AI boom has brought substantial revenue growth for many companies. Bearish investors may point to that and say what goes up must come down.
However, there is a major difference with this cycle. Tech giants have been committing to high capital expenditures or raising their projected spending. Micron has also been securing multi-year contracts with its customers that offer meaningful revenue visibility.
Micron's financial performance has become more durable and predictable, per the company's Q3 fiscal year 2026 press release. That's an important detail when diving into the stock's valuation.
It's cheaper than bank stocks Normally, stocks like Micron garner so much attention from investors that they end up with high valuations. This scenario results in many good companies that are bad stocks.
Micron is a rare exception. Not only is it growing faster than almost every publicly traded company while expanding profit margins, it's also cheaper than most bank stocks.
The S&P 500 Financials Sector has a price-to-earnings (P/E) ratio of 18. That's slightly lower than Micron's P/E ratio of 19, but Micron is growing substantially faster than every bank. The bargain becomes more apparent when looking at Micron's forward P/E ratio of 5.
A company posting Micron's growth rates is not supposed to be cheaper than mature bank stocks. In fact, it's still more affordable than every "Magnificent Seven" stock, and Micron's fundamental growth rates are outpacing all of those tech giants.
Memory has become a foundational piece of AI infrastructure. Tech giants do not want to miss out on this opportunity, despite rising prices. Amazon raised its 2026 capital expenditures forecast from $200 billion to $220 billion, citing rising memory costs.
With demand for Amazon Web Services reserved through 2028, the need for memory chips will accelerate from here. Amazon isn't the only company benefiting from its AI investments. The competition among big tech companies positions Micron well for multiple years, and it's a reality many investors are overlooking.
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
For the 386 S&P 500 companies that have reported Q2 results, or 77.2% of the index’s total membership, total earnings are up +41.7% from the same period last year on +14.8% higher revenues, with 83.7% beating EPS estimates and 77.2% beating revenue estimates.This is a notably better showing from these 386 index members relative to other recent periods, both in terms of the earnings and revenue growth rates as well in terms of the beats percentages. The EPS and revenue beats percentages for these companies are notably tracking above the averages for this group of companies over the preceding 20 quarters.The Q2 earnings and revenue growth rates have been boosted by Micron’s (MU - Free Report) blockbuster quarterly results and Alphabet’s (GOOGL - Free Report) unrealized gain on its SpaceX stake. However, the earnings and revenue growth rates would still compare favorably with other recent periods when we exclude Micron and Alphabet from these results. Excluding Micron and Alphabet, Q2 earnings for the remaining 384 index members that have reported Q2 results would be up +19.6% (vs. +41.7% otherwise) on +13.6% higher revenues (vs. +14.8% otherwise). The Tech sector has been a critical growth pillar since 2023 Q3 and is expected to continue playing that role in 2026 Q2, with expected earnings growth of +93.6%. Excluding the Tech sector’s substantial contribution, Q2 earnings growth for the rest of the S&P 500 index would be +17.7% (vs. +42.2% otherwise).Nvidia ((NVDA - Free Report) ), Micron ((MU - Free Report) ) and Alphabet ((GOOGL - Free Report) ) are material contributors to the Tech sector’s growth profile in 2026 Q2 and the coming quarters. Excluding the contribution from these three Tech players, Q2 earnings growth for the rest of the Zacks Tech sector drops to +31.4% (from +93.6%).
The Earnings Big Picture
The chart below shows S&P 500 expectations for 2026 Q2 in terms of what was achieved in the preceding four periods and what is currently expected for the following three quarters.
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture for the S&P 500 index on an annual basis.
Image Source: Zacks Investment Research
The chart below shows the significant contribution of the Tech sector to the aggregate growth picture. The chart also shows how critical Nvidia, Micron, and Alphabet are to the 2026 aggregate growth tally.
Image Source: Zacks Investment Research
Estimates for full-year 2026 have also been steadily going up, particularly since the start of March. The chart below shows the evolution of aggregate S&P 500 earnings estimates since last July.
Image Source: Zacks Investment Research
Full-year 2026 earnings estimates have increased for 10 of the 16 Zacks sectors since the start of March, with the most pronounced gains at the Energy, Basic Materials, Tech, Industrials, Utilities, and Business Services sectors. On the negative side, estimates have been under pressure for the Transportation, Autos, Medical, and Consumer Discretionary sectors since the start of March.
Nvidia (NVDA) shares climbed about 3% on Wednesday as SpaceX selected the chipmaker as its sole AI hardware supplier for future infrastructure, while other majo
Michael Burry (Trades, Portfolio) is keeping his bearish market view intact as U.S. stocks reach fresh highs, warning that the current rally could eventually gi
Key Takeaways Micron fell 9.4% in a month, but the pullback reflects sector pressure and profit-taking.MU sold out its 2026 HBM output, with part of 2027 capacity reserved under long-term agreements.Micron's fiscal Q3 revenues rose 346% to $41.46B as margins expanded and AI memory demand surged. Micron Technology, Inc. (MU - Free Report) has lost some of its momentum after a stellar run earlier this year. The stock has fallen 9.4% over the past month, much worse than the Zacks Computer and Technology sector's 2% decline. At first glance, such a sharp pullback may look concerning. However, a closer look suggests that the weakness has more to do with broader market sentiment than any deterioration in Micron's business.
The recent selling has not been limited to Micron. Other memory and storage companies, such as Sandisk (SNDK - Free Report) , Western Digital (WDC - Free Report) and Seagate Technology (STX - Free Report) , have also come under pressure. Over the past month, Sandisk, Western Digital and Seagate Technology have declined 18.2%, 5.6% and 2.7%, respectively. This indicates that investors are trimming exposure to the memory and storage space as a whole rather than singling out Micron.
Micron One-Month Price Return Performance
Image Source: Zacks Investment Research
The sell-off has been driven by two key concerns. First, investors are debating whether hyperscalers will earn attractive returns on their massive AI investments. Second, memory stocks rallied sharply in the first half of 2026, prompting many investors to lock in profits after strong gains.
Despite this negative sentiment, Micron's underlying business remains strong. The company remains one of the biggest beneficiaries of the AI infrastructure boom, and the demand outlook for its products continues to improve.
AI Memory Demand Remains Micron's Biggest Growth DriverAI is transforming the memory industry, and Micron is well positioned to benefit. Training and running advanced AI models require much larger memory capacity and significantly higher bandwidth than traditional computing workloads. This is driving strong demand for high-bandwidth memory (HBM), DDR5 DRAM and advanced data center SSDs, where Micron has built a strong portfolio.
The spending plans of major cloud providers further reinforce this opportunity. Amazon, Microsoft, Alphabet and Meta Platforms are expected to invest nearly $700 billion in capital expenditures during 2026, with AI infrastructure accounting for a significant share of that spending. Every new AI server requires substantially more memory than previous-generation systems, creating a powerful demand tailwind for Micron.
The company has also strengthened its competitive position through product innovation. Its latest HBM solutions deliver higher capacity, better performance and improved power efficiency, making them attractive for AI accelerators used by leading chipmakers and cloud providers. Demand has been so strong that Micron has already sold out its HBM production for calendar year 2026, while a meaningful portion of its 2027 capacity has already been reserved under long-term customer agreements.
As enterprises continue expanding AI deployments, memory content per server is expected to keep rising. This gives Micron a long runway for sustained revenue growth.
MU’s Results Show the AI Opportunity Is Already Paying OffMicron's financial performance clearly shows that AI demand is translating into real business growth.
In the third quarter of fiscal 2026, revenues surged 346% year over year to $41.46 billion. The company also signed 16 strategic customer agreements across the data center, consumer and automotive markets. These agreements cover nearly 20% of expected DRAM volumes and about one-third of NAND volumes over the contract period, providing strong revenue visibility.
The company is also selling a larger mix of premium memory products, allowing profits to grow much faster than shipment volumes. Non-GAAP earnings per share jumped to $25.11 from just $1.91 a year ago, while both revenues and earnings comfortably exceeded analysts' expectations.
Profitability improved sharply as better DRAM and NAND pricing combined with rising shipments of AI-focused memory products. Non-GAAP gross margin expanded to 84.9% from 39% a year earlier. Non-GAAP operating income climbed to $33.68 billion from $2.49 billion, while operating margin rose to an impressive 81.2% from 26.8%.
These numbers highlight Micron's strong pricing power and ability to convert booming AI demand into significantly higher earnings.
At the same time, management continues investing aggressively in advanced manufacturing and next-generation memory technologies. These investments should help Micron defend its technology leadership and meet growing customer demand over the coming years.
Micron Still Looks UndervaluedDespite its strong earnings growth, Micron's valuation remains surprisingly modest. The stock currently trades at a forward 12-month price-to-earnings (P/E) ratio of just 5.88, well below the sector average of 21.26.
Micron Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
Micron also trades at a discount to several memory peers. Sandisk trades at a forward P/E of 7.45, while Seagate Technology and Western Digital trade at 23.29 and 27.30, respectively.
A low valuation alone is not enough to justify buying a stock. However, when that valuation is backed by explosive earnings growth, expanding margins and powerful long-term industry trends, it becomes much more compelling. Micron checks all of those boxes.
Conclusion: Buy Micron StockGiven Micron’s leadership in AI memory, strong execution, expanding profitability and inexpensive valuation, the recent pullback appears to be a buying opportunity rather than a reason for concern. Investors looking to benefit from the ongoing AI infrastructure buildout should consider buying Micron stock at current levels.
Currently, Micron sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Elon Musk says that the artificial intelligence build-out has a memory problem. The CEO of Tesla and Space Exploration Technologies (SPCX -10.74%) said on SpaceX’s earnings call that demand for memory chips is growing much faster than the available supply.
“The limiting factor currently is memory,” he said.
Musk’s statement is notable for two reasons. First, both his companies are keenly interested in buying memory, so Musk knows the space well. Tesla and SpaceX both rely on artificial intelligence for their future goals, and both are investing billions to purchase AI chips, memory, storage, and other AI infrastructure for their data centers.
And second, prices for memory components are rising amid massive demand, which, in turn, is causing major hyperscalers to spend billions more on capital expenditures. Alphabet raised its capex budget by $15 billion to $200 billion; Amazon bumped its budget from $200 billion to $220 billion; and Meta Platforms increased the low end of its outlook from $125 billion to $130 billion. Investors have become concerned that rising prices, coupled with the memory chip shortage, could slow the AI infrastructure boom.
Now Musk is saying that won’t be the case at all.
"The memory output is increasing by around 20% per year. Now, normally, that would be fantastically fast and amazing for any large, mature industry, but ask yourself: Is the demand increasing by 20% a year?” Musk asked. “No, the demand is increasing by 200% a year, maybe higher. So, if you've got demand increasing much faster than supply, then economics 101 would suggest that the price increases. It does not decrease."
Let’s look at two companies that would be best positioned to benefit from Musk’s viewpoint: Micron Technology (MU +2.96%) and SK Hynix (SKHY -1.28%).
Tesla and SpaceX CEO Elon Musk. Source: The White House.
Memory chip stock No. 1: MicronMicron, by any measure, is having a solid year, with its stock up more than 215% and earnings results that are more than solid. But concerns about memory chip prices and the ongoing build-out of AI have weighed on the stock, and Micron is currently sitting 25% off all-time highs set in June.
Those concerns aren’t affecting Micron’s bottom line, however. The company reported massive growth in the fiscal third quarter (ending May 28), with revenue more than quadrupling year over year to $41.46 billion. Net income of $28.24 billion was up from $1.88 billion in Q2 2025.
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Operating margins also increased -- the company’s data center segment’s operating margin rose from 38% to 87%, and its cloud memory segment’s operating margin improved from 46% to 78%.
“Micron’s record fiscal Q3 financial results and even stronger outlook for Q4 reflect the strategic value of memory in the AI era,” CEO Sanjay Mehrotra said. “Micron is investing at record levels in technology, products, and supply to address our customers’ rapidly growing demand.”
Memory chip stock No. 2: SK HynixSK Hynix is one of the newer stocks to the U.S. market, having completed its IPO on the U.S. market in July. But it’s already a heavyweight, with a market cap of more than $800 billion, ranking it among the top 20 publicly traded companies in the world.
The company is a leading provider of high-bandwidth memory products, and holds more than 50% of the market this year. It also has a key multiyear infrastructure and memory deal with Nvidia that’s valued at more than $500 billion.
The South Korean company had an amazing second-quarter report, with revenue of $55.7 billion, up 51% from a year ago, and operating profit of $41.62 billion, with margins of 76%. But even those numbers couldn’t satisfy the markets -- analysts had been expecting even better numbers, and the stock fell 15% before rallying to close just 9% on July 28.
Today's Change
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Current Price
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152.41
The company attributed its growth to increased demand and price increases for AI products. It increased its prices for both DRAM and NAND flash memory and achieved top-tier profitability by expanding sales of high-value-added products, including high-bandwidth memory, DRAM for AI servers, and enterprise SSDs.
SK Hynix’s position in high-bandwidth memory products, its partnership with Nvidia, the leading chip and AI company, and its newly won inclusion in the Nasdaq index make the company a legitimate contender in the memory chip space. If Musk is right that memory demand is increasing far faster than supply, SK Hynix appears to be positioned well.
