Micron Just Extended Its Forecast for the AI Build-Out to 2031. Its Stock Is Bound to Defy History.
Micron Just Extended Its Forecast for the AI Build-Out to 2031. Its Stock Is Bound to Defy History.
Keithen Drury, The Motley FoolSat, October 3, 2026 at 4:11 PM UTC
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Image source: The Motley Fool.Key Points -
Micron expects memory supply in 2027 and 2028 to be tighter than it was in 2026.
Some of Micron's clients are extending their long-term purchasing deals into 2031.
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Micron Technology(NASDAQ: MU) just dropped some bombshell news on the AI world: Its customers expect their huge needs for memory to persist through at least 2031. That date used to be 2030, but as the AI build-out continues to ramp up, Micron's customers are extending their deals with it to lock in their access to memory chips for longer time frames.
But that was not the only bombshell Micron dropped for investors in the earnings report it released on Sept. 30. There were plenty of other tidbits in it that make the stock a screaming buy.
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How long can the memory sector's boom cycle last?
Micron makes memory chips, which are highly commoditized products. Within each generation of the technology, there isn't a ton of difference between those made by one chip designer and another. This means tech companies can switch from one supplier to another without running into technical roadblocks, or source their memory from multiple suppliers to get what they need. However, something unexpected happened to the memory chip industry in 2026: Supply ran out.
Due largely to the hectic pace of the AI data center build-out, there is now far greater demand for memory chips than there is supply, so prices for memory chips have skyrocketed. The input costs for the manufacturers didn't change much; the memory chip companies were free to raise prices because of the laws of supply and demand, and they've done so. This has had a huge impact on the finances of Micron and its peers, and it showed up in Micron's results for the fourth quarter of its fiscal 2027 (which ended Sept. 3).
Revenue was $54.2 billion in the quarter, up from $41.5 billion last quarter and $11.3 billion in the prior-year period. That's incredible growth, and with Micron projecting $61.5 billion in revenue next quarter, there's more growth to come.
Micron stock has soared by close to 500% over the past year as its profits have surged. However, in another sense, investors remain relatively cautious with the stock. Its forward price-to-earnings ratio is still just around 6.
The reason for that caution is that the memory-chip market has historically been highly cyclical. After every previous boom, some combination of slackening demand and expanded production capacity has shifted conditions from shortage to glut. Prices have come crashing down, dragging Micron's margins with them.
For now, though, I don't think investors have to be concerned about that.
Micron's management released some interesting information that downplays the outlook for another memory market slump, and it could be years before the conditions now benefiting it dissipate.
Micron's management is bullish on memory chip demand
One statement in Micron's earnings deck is central to the investment thesis: "We expect memory and storage supply demand conditions to be much tighter in fiscal 2027 and 2028 than they were in 2026."
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That's right, Micron just told investors that as tough as 2026 was on its customers in terms of supply and demand, 2027 and 2028 will be worse. That may be a scary proposition for some companies, but if you're a Micron investor, it should be music to your ears.
It means demand will stay elevated and memory chip prices could continue to rise, leading to a longer period of wide profit margins for Micron.
Another major announcement was that some of Micron's strategic customer agreements are starting to include purchase commitments extending through 2031. That's huge news, because it indicates that the AI build-out, which some forecasters had expected would start to slow down in 2030, could last longer than expected.
All of this points to the likelihood that elevated memory chip demand could last for another five years. That would make this boom cycle by far the longest-lasting one Micron has ever experienced. That in turn means that there is still huge upside for its stock, and that investors don't need to worry about a cyclical downturn in the memory market arriving anytime soon.
With Micron expected to deliver huge growth over the next five years thanks to increasing AI demand, and with the stock trading for a dirt-cheap valuation of about 6 times forward earnings, it's a no-brainer stock to buy now.
Should you buy stock in Micron Technology right now?
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Keithen Drury 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.
Source: “AOL Money”
