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LivestreamMenuShares of Micron Technology , which have more than tripled this year, currently trade at just above 6 times forward earnings. One of the best-performing stocks of the AI bull market also sports the third-lowest multiple in the S & P 500, with only Charter Communications, a struggling cable and broadband company, and General Motors, a cyclical automaker, cheaper. In the past, there was good reason for that discount. Memory was historically one of the most cyclical parts of the semiconductor industry, meaning profits could surge when supply was tight and fall sharply once new capacity catches up with demand. Investors therefore were reluctant to pay a high multiple for earnings that may not last. But Micron and the structure of the memory industry are changing, and the market may not fully reflect that yet. I first pitched Micron as a long investment at Columbia Business School in fall 2025, when it was trading around $238, and later presented the stock at Columbia’s Applied Value Investing Stock Pitch Challenge in January 2026. Even then, the main concern was the stock’s historical cyclicality, and the name is still a controversial one today. MU YTD mountain Micron, YTD That tension was visible after Nvidia reported earnings Wednesday evening. Nvidia shares rose sharply on Thursday after strong results and guidance. Nvidia Chief Financial Officer Colette Kress told analysts that “many of you have expressed concerns regarding our gross margins as component costs have risen significantly,” adding: “We are experiencing extreme pricing conditions in memory.” For Micron, one of the three major suppliers of high-bandwidth memory used in AI systems, that pricing environment should be a positive. Micron did open about 3% higher on Thursday, only to then give up that gain and finish the session lower. Part of that move may have had little to do with Micron itself. D.A. Davidson’s Gil Luria pointed to a broader trading unwind: some investors had been financing long semiconductor positions by shorting software stocks. When software rebounded sharply, traders covering those shorts also had to sell semiconductors. Still, the reaction illustrates how contested the memory trade has become. The key debate is whether today’s earnings are simply another unusually strong point in a familiar memory cycle or evidence that the economics of the business are changing. Wall Street can’t have it both ways The bear case deserves to be taken seriously. Memory shortages have historically followed a familiar pattern: tight supply pushes prices and profits higher, which encourages companies to add capacity. Eventually, supply catches up and pricing moves back toward equilibrium. More supply is coming, with additional competition now arriving from China. There is a fair argument that Micron will not capture the full upside of the current shortage because of new long-term customer agreements that include price ceilings and floors, which Micron announced on its last earnings call. However, doesn’t conceding that the company will not capture the full upside of the current shortage also mean conceding that it should no longer suffer the same degree of downside and cyclicality as in previous cycles, which is the very risk that has historically justified its low multiple? The same contracts that limit how much Micron can earn when prices surge also reduce how far earnings can fall when the cycle turns. The agreements include binding volume commitments, take-or-pay provisions and, in many cases, price floors. Micron has said these agreements generally extend through 2030 and that, once planned agreements are completed, roughly half or more of company revenue should be covered by such arrangements. For contracts that include price bands, management has said the minimum prices would still imply gross margins “well above” the company’s peak quarterly margins in previous memory cycles. That matters because Micron’s low valuation has historically reflected the risk that profits could collapse quickly when memory pricing weakened. How low is too low? Long-term contracts constrain some of the upside. They also reduce the range of possible outcomes on the downside. In other words, Micron is exchanging some potential peak-cycle economics for greater earnings visibility. That does not mean the company is no longer cyclical. A meaningful portion of revenue will still be exposed to market prices. Contracts can eventually reset. More supply will come online. And the long-term strength of AI demand remains uncertain. The question is whether Micron still deserves the same valuation discount if its profits are becoming less volatile. If these agreements work as intended, they create a case for a re-rating and a higher multiple. At roughly six times forward earnings, the market is still pricing in significant skepticism about the durability of Micron’s profits. The more important question is no longer whether memory remains cyclical. It is whether Micron remains cyclical enough to deserve the same valuation framework investors used in previous cycles.Read More
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