Tech Corner: Measuring MU Room to Run After Parabolic Rally

Hinzugefügt: 2026-06-01

[00:00:04]All right, welcome back to the tech corner. I'm George Tillas, senior markets contributor here with the Schwab Network. On this week's edition, we're going to be revisiting Micron Technologies. As we talked about before, Micron is a global leader in the semiconductor-based memory storage solutions market. The company designs, develops, and manufactures a broad range of high-performance memory storage solutions, including dynamic random access memory, also known as DRAM technologies, NAND flash memory, as well as what's most important now in the context of AI is high-bandwidth memory.

[00:00:37]These products serve various end markets, which include data centers, PCs, graphics, networking, automotive, industrial, as well as all consumer electronics. The company operates under four major segments. First, its compute and networking division includes memory sold in the computing networks, graphics, as well as cloud server markets. Storage, which also includes memory and storage sold in the enterprise cloud and removable storage markets, as well as mobile, which includes memory products sold to smartphones, tablets, and mobile device markets. Lastly, its embedded market includes memory sold in the automotive, industrial, as well as in connected homes. Now, when it comes to competition, Micron faces competition from major players in the semiconductor memory storage markets. These include the two majors in Korea, Samsung and SK Hynix, as well as two US competitors, Western Digital and Seagate, which compete in the memory storage and unified software markets.

[00:01:32]Now, Micron's unique value proposition lies in its robust portfolio of high-performance memory and storage solutions, which cater to various sectors, including data centers, automotive industry, embedded, industrial, as well as consumer end markets. It is only one of the three major manufacturers leading in high-bandwidth memory. The other two being Samsung and SK Hynix. It's also as a company making strategic investments in the United States with manufacturing facilities.

[00:01:58]All right, now let's take into consideration some recent news for Micron. Now going back to March 18, 2026, the company reported its fiscal Q2 2026 revenue and earnings. The company printed $26.86 billion, which was a massive increase from fiscal Q1's 13 and 1/2 billion, and up 196% year-over-year compared to slightly over $8 billion for the same quarter last year. They delivered on a non-GAAP basis $12.20 per share. Again, significantly higher than last quarter's $4.78, and a tremendous increase compared to $1.56 for the same quarter last year.

[00:02:35]Gross margins also increased to a historic 74.9% of sales, up from 56.8% in Q1.

[00:02:43]This is essentially proving the margin expansion narrative for Micron is fully playing out. Now from a business unit performance, Micron's DRAM revenue, which represents around 79% of the total, increased to $18.8 billion, showing immense sequential growth from fiscal Q1. NAND revenue grew to $5 billion, representing around 21% of revenues. Management noted on the call that data center solid-state drive technology demand is far outstripping their available supply for the foreseeable future. The revenue mix still remains highly concentrated or weighted towards DRAM technologies, but a significant rise in average selling price lifted both buckets significantly.

[00:03:22]The core data center sales growth was a highlight. They generated $5.6 billion in the segment, up 139% year-over-year.

[00:03:30]Micron also announced volume shipments of its fourth-generation high-bandwidth memory designed for Nvidia's Vera Rubin platform, aiming to cement its technology leadership through the latter half of calendar 2026. Now aside from that news, let's also look at some additional positives for the business.

[00:03:47]First off, Micron's transition to a strategic AI infrastructure enabler, driven by AI demand and tight supplies for its technologies, supports margin expansion and a potential for stable earnings growth to come. Nvidia's VeraRubin platform transition expands Micron's monetization opportunity beyond high-bandwidth memory and high-performance solid-state drives, reinforcing demand visibility and pricing tailwinds. Micron also declared that its 2026 capacity is 100% sold out.

[00:04:16]And its data center segment, as I mentioned, is thriving, driven by AI demand, record DRAM revenues, and promising partnerships.

[00:04:24]Now, despite the most recent rally in the price, it still remains as a business relatively attractively valued, supported by its robust data center prospects. Both sales growth and profitability trends are above historical five-year averages, indicating efficient profit generation.

[00:04:39]If we look at the numbers on a forward basis, revenue is estimated to grow nearly 91%, which is nearly four times the historical five-year average. Gross margin on a trailing basis is also at 58.4%, again exceeding 70% for last quarter, and this number is significantly higher than the five-year average, which is around 29%. This again suggests there's high pricing power in the high-end market demand. The bottom line is also improving. Net income margin over the past four quarters is up to 41.5% of sales. This has bested the sector median by a long shot, which is around 6% and also above its five-year average, which is around 9.82%.

[00:05:20]So, again, that 41% net income margin is over 30% higher than its five-year average, suggesting the company's generating a high return on equity.

[00:05:29]Lastly, let's also consider some of the forward estimates and earnings numbers.

[00:05:33]The reason I bring this up is because many folks believe that the price of Micron is overinflated, but if we consider it relative to earnings, it may not necessarily be so. For example, for the fiscal year period ending 2026, the company's estimated earn $58.72 and in 2027 it's estimated earn over $104 per share. If we take these numbers and compare them to the trailing four quarters of $21.92, we're talking about expansion of nearly three times for 2026 and nearly five times expected for 2027. Now, despite all these great things going on with Micron, I always have to address some concerns about every business.

[00:06:14]First off, the AI field demand boom may not sustain Micron's current profitability levels. An industry-wide capacity expansions and the potential demand headwinds could threaten the sustainability of current profitability metrics. Lastly, despite the robust AI-driven demand, Micron remains a deeply cyclical business with elevated risk of oversupply and pricing challenges as capacity expansions are expected in the 2027 and 2028. Now, let's take a look at the technical analysis picture for Micron.

[00:06:44]First off, the technical condition for Micron's price is extremely strong. And the chart pattern suggests that upper momentum may continue. Over the past 52 weeks, the stock is up over 850% and has significantly outperformed the market over the last 30 and 60 trading days when you compare it to the NASDAQ or even the S&P 500. From a near-term perspective, the stock has advanced significantly above its rising 20-day moving average, which suggests a possible healthy retracement to this level and an overall bullish trend continuation pattern may occur. The stock is also trading above a rising 50-day moving average, which validates the strong technical condition for Micron. The stock is also well above its 200-day moving average, which is pointed up indicating that the intermediate-term trend is still bullish. Now, let's take into consideration that if Micron stays above the 50-day moving average and resets its momentum, this could signify a classic trend continuation look. Now, keep in mind that if it loses a 50-day moving average with volume, then you have to start respecting the possibility of a deeper retracement, even if the long-term fundamental narrative remains strong. And lastly, one cannot deny that Micron's chart formation indicates a strong rising trend. However, upside momentum as measured by the weekly RSI indicator is positive near the 90 level, suggesting the stock may enter a consolidation phase after a significant 8-week parabolic run-up. Now, in conclusion, we know that Micron is well known for its innovative technology, such as 3D stacked DRAM architecture and advanced NAND products, which support AI and data-driven intensive applications.

[00:08:22]The strategic shift from a commodity supplier to a critical AI enabler has resulted in robust financial performance driven by strong demand for high-bandwidth memory. Now, we must remember that Micron is a deeply cyclical company operating in a rare secular window where AI-driven demand, tight supply, and a mix shift are all pushing in the same direction for the business. The company's latest quarterly results and next fiscal year guidance both confirm that the fundamentals are unusually strong. The real debate isn't whether Micron isn't executing on its business, it certainly is. The debate is really about how long this pricing and margin regime lasts before the memory cycle normalizes. All right, that's it for this week's edition of the Tech Corner. Please don't forget to like and subscribe to the Schwab Network. I am George Sileo. We will see you next week.

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