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Micron sells semiconductors for memory and storage. Its “Not And” (NAND) chips offer non-volatile data storage, which maintains stored information when a system’s power is turned off. Separately, its Dynamic Random Access Memory (DRAM) chips offer volatile memory storage for personal computers, data centers, and mobile devices. “Volatile” means that storage isn’t maintained when a system’s power is turned off. DRAM helps processors access real-time data to minimize processing latency. These chips are considered to be commoditized at this point, with Micron’s cost advantages providing its edge.

These chips provide the foundation for its solid-state drives (SSDs), which are used in computer data storage and things like USB flash drives. Micron sells standalone NAND chips as well as SSDs with NAND chips in them. SSDs replace hard disk drives (HDDs), as they’re more power efficient, durable and resilient. It provides basic memory cards for things like gaming devices and cameras as well.

Perhaps most interestingly, Micron offers a type of DRAM called high-bandwidth memory (HBM) to meet the massive data needs of GenAI. It sharply improves data processing capabilities and facilitates improved data sharing between CPUs & GPUs. Nvidia is a big customer, using Micron’s HBM in its Blackwell and future Vera Rubin systems. It also offers high-capacity SSDs to help with LLM storage.

Finally, it's worth noting that Micron's business model has been very cyclical from inception. Their end markets experience sharp demand peaks and valleys, and their revenue and margins aggressively fluctuate as those processes play out. Micron is at the center of the high-bandwidth memory boom, tied to the current AI revolution. They're experiencing the largest and most powerful cycle yet, and are a direct beneficiary.

MU beat revenue estimate by 22.6% & beat guidance by 27.8%. Excellent. In terms of what's driving this fantastic demand, it's mostly the AI boom and coinciding memory and storage needs. More complex models need more high-bandwidth memory to provide reasoning workloads with the context required to conduct valuable work. Micron is doing so with performance they view as among best-in-class. That’s important for overall AI system cost efficiency, as things like AI-powered personal computers require 2x the amount of memory vs. predecessors. In isolation, better performance would also mean pricing efficiency, but Micron is taking advantage (as they should be) of the supply-demand imbalance by flexing its pricing power muscles. Specifically, DRAM pricing rose by around 65% Q/Q, while NAND pricing rose by nearly 80% Q/Q. Shipment volumes for both segments rose at a single-digit clip Q/Q. Expansion was still healthy, but it's worth noting that pricing is generating virtually all of the growth we're currently seeing. That pricing is reliant on supply shortages remaining in place as Micron, Samsung, SK Hynix and others all look to rapidly bolster capacity and fill the excess demand. If history is any indication, these companies will overbuild and pricing power will wane. The question is, when? That’s extremely difficult to answer, but it does not look like the end of this party is coming, at least in the next couple of quarters. For now, demand is excellent, supply is very tight, and pricing power is abundant. 

“Our memory and storage solutions are at the heart of this AI revolution… without more memory, without faster memory, AI just cannot scale up.” – CEO Sanjay Mehrotra