Market Thinks Micron Stock Is Cyclical, HBM Says Otherwise

Micron Technology stock (NASDAQ:MU) has surged more than 4x over the past 12 months. Yet Micron valuation remains compressed at just 12x FY’26 earnings and a little over 9x FY’27 earnings. The market is sending a familiar signal: memory earnings are cyclically high, and history says they will fall.

For decades, that logic has worked. Memory has been one of the most cyclical businesses in semiconductors. When profits peak, investors fade them by compressing the multiple.

What has changed is the structure of demand. AI-driven memory, especially High Bandwidth Memory (HBM), is growing faster, selling out years in advance, and operating under supply constraints that did not exist in prior cycles. The real question is whether this is enough to change the cycle itself.

Micron’s current multiple assumes it is not.

Image by Cliff Smith from Pixabay

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Is HBM really different from past memory cycles?

Looks like it.  Historically, Micron’s earnings were dictated by PC and smartphone demand. DRAM and NAND were interchangeable commodities, pricing was market-driven, and Micron followed the cycle.

HBM breaks that pattern. It is a tightly engineered component designed directly into AI accelerators and data center systems. Supply is constrained, qualification cycles are long, and customers sign multi-year contracts with prepayments. Micron’s HBM capacity is effectively sold out through 2026, placing a hard floor under a meaningful portion of revenue.

This is a shift from price taker to selective price maker in Micron’s highest-value products.

Why Are Customers Choosing Micron for HBM?

Power efficiency and process leadership. Unlike traditional DRAM and NAND markets, Micron’s differentiation in HBM comes from power efficiency. Its HBM3E products consume roughly 30% less power than competing solutions.

For hyperscale data centers, power and cooling are the limiting constraints. Lower power drawing directly, reduces operating costs and increases usable compute density. For customers like Nvidia, Meta, and Google, Micron’s memory is not a commodity input but a system-level cost lever.

On the manufacturing side, Micron leads on advanced DRAM nodes, including early sampling of 1-gamma DRAM using EUV. This positions it well for the HBM4 transition expected to ramp in mid-2026, when performance and power requirements tighten further.

What does the revenue and cash flow bridge look like?

Large, visible, and accelerating.

Micron generated approximately $37.38B in revenue in the last twelve months. The catalyst is the AI infrastructure buildout, where HBM demand is expanding far faster than traditional memory segments. The shift toward high-value AI memory, combined with the ramp of 1-gamma nodes, is projected to nearly double revenue in the current fiscal year.

The math is straightforward:

Base $37.38B + $37.42B catalyst = approximately $74.80B, or 100% year-over-year growth. Looking into FY’27, revenue is expected to grow another roughly 22% as HBM4 enters mass production.

Micron is investing aggressively, with FY2026 capex projected near $20B to support HBM4 capacity and new fabs in Idaho and New York. In past cycles, this would have crushed free cash flow. This time, operating cash flow is rising alongside margins. Gross margins surged to about 57% in Q1, up from roughly 40% in the year-ago quarter.

Is the downside still as severe as in past cycles?

No. The floor appears higher.

HBM consumes roughly three times the wafer capacity of standard DRAM. This die penalty creates a structural undersupply across the memory market, supporting pricing even outside of AI demand. As a result, Micron’s downside risk in the next cycle could be lower than it has historically been.

Despite the stock’s rally, Micron trades at multiples well below most AI infrastructure peers. If earnings durability continues to improve, a gradual re-rating is plausible. Micron may never be fully non-cyclical. But AI has shifted it from a pure commodity swing factor into a structurally relevant infrastructure supplier, with higher floors on revenue, margins, and cash flow. The distinction matters, and the market is still catching up.

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