The AI Backbone: How Micron Stock Surged 85% This Year

September 25th, 2025 by Trefis Team
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Micron Technology

As generative AI reshapes industries, one of the most critical – but often overlooked – components powering this revolution is memory. Memory maker Micron (NASDAQ:MU) is at the heart of this transformation, providing the high-bandwidth memory (HBM) and DRAM that keep massive AI models running at speed and scale. With AI workloads growing more complex every day, memory is becoming indispensable to hyperscalers and cloud providers. While GPUs and accelerators grab headlines, memory is the silent backbone that determines how fast and efficiently these systems can operate. Micron stock price does reflect this growing demand, surging by about 85% year-to-date in 2025. However, is the stock still worth a look at current levels?

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio is designed to reduce stock-specific risk while giving upside exposure.

Image by Cliff Smith from Pixabay

Earnings And Outlook

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The numbers are evident from Micron’s results. For the quarter ended August, Micron revenue reached $11.32 billion, up 46% year-over-year, while adjusted net income surged 157% to $3.47 billion ($3.03 per diluted share). Notably, sales in the cloud memory business more than tripled to $4.5 billion. CEO Sanjay Mehrotra told analysts that demand for Micron’s DRAM and NAND products was higher than previously expected, boosting the company’s outlook.

Strong DRAM shipments across all end markets, robust pricing due to limited supply and low inventory, and slower migration to newer process nodes that are restricting overall output are all contributing to the growth. Micron expects a favorable demand-supply environment for DRAM in 2026, supporting continued profitability. For Q1 2026, Micron expects revenue of $12.5 billion plus or minus $300 million, up about 61% year-over-year at the midpoint.

Strong HBM Memory Demand

HBM is ultra-fast, low-latency memory designed primarily for AI accelerators and GPUs to rapidly process massive model data, while DRAM offers larger-capacity, general-purpose memory that supports AI workloads by storing bulk data, albeit with slower transfer speeds than HBM. Micron is a primary memory and storage partner for Nvidia’s Blackwell GB200 and GB300 platforms, supplying both HBM3E and LPDDR5X solutions, and is also a key supplier for AMD’s Instinct MI350 GPUs. Nvidia’s latest systems feature 33% more memory per node than previous generations, while AI models are increasingly multimodal – incorporating text, video, and speech – further intensifying memory demand. See our note on how Micron Stock Surges 2x To $300

To illustrate the scale of the spending on AI, Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Meta (NASDAQ:META) have indicated that they could collectively invest $364 billion in capital expenditures for their respective current fiscal years. Oracle said earlier in September that it has signed hundreds of billions of dollars worth of contracts to provide cloud computing services to OpenAI as well as other large customers. While these infrastructure commitments will call for computing power – GPUs or custom ASICs, server and networking tools, memory will also be key and Micron could benefit considerably from this build out.  As AI adoption spreads across the economy, Micron is positioned for a prolonged growth trajectory.

There are signs that the most compute-intensive phase of AI training may begin to level off, with the industry’s focus shifting toward inference – the application of trained models to new data in real time and at massive scale. Inference is lighter per task but occurs continuously across millions of users and applications.  HBM is crucial for powering AI inference at scale due to its bandwidth and power efficiency advantages, complementing high-end GPUs primarily used for training. This trend indeed favors specialized, power-efficient vendors like Micron.

Supply Boost

However, supply may not keep pace easily. Manufacturing HBM is more intricate than standard DRAM, and supply levels are still constrained. The production of HBM is wafer-intensive – it requires approximately three times as many wafers as standard DRAM to create the same quantity of bits due to its lower bit density and intricate 3D stacking. This forms a natural bottleneck. Although Micron has been expanding its HBM production capacity, output for 2025 is already sold out, with robust demand anticipated in 2026. The company spent $13.8 billion on capex in FY’25 and plans to increase spending further in 2026, primarily to expand DRAM capacity for AI workloads. For Q1 2026 alone, Micron expects to invest $4.5 billion, with the majority of capex directed toward DRAM. That number is a baseline for what investors can expect each quarter, meaning that total capex for the year is very likely to exceed 18 billion.
Even after this substantial rally, Micron stock is valued at about 10x estimated earnings for 2026. Projected growth looks robust: expected revenues are set to rise by 42% in 2026, based on consensus estimates.  That said, the memory market has been inherently cyclical. DRAM and NAND remain vulnerable to fluctuations in supply and demand, along with pricing volatility. At this juncture, it appears that HBM serves as a partially secular growth driver, given the near relentless spending by big tech companies over the last three years. Nevertheless, HBM presently comprises only a small percentage of total sales, meaning the company is not entirely insulated from traditional market cycles.

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