Key Takeaways
- Micron shares jumped 6% after IREN’s results eased fears that AI data-center spending is slowing.
- Seagate, Applied Materials and Nvidia ride the same AI build-out.
- Analysts expect Micron’s earnings to more than double in fiscal 2027, yet the stock is valued as it was at the last memory cycle’s peak.
- With most of its 2027 output committed, Micron looks cheap unless the 2028 data-center build stalls.
Micron Technology (MU) jumped 6% this morning, winning back part of Thursday’s 17% crash.
After Thursday’s close, AI cloud provider IREN reported $228 million of quarterly revenue, beating estimates, and a $20.3 billion backlog. It also signed contracts for older Nvidia (NVDA) H100 chips at twice its previous rates. That lifted Micron along with Seagate Technology (STX), up 2%, and Applied Materials (AMAT), up 7%.
Thursday’s selloff came as Democrats’ midterm sweep stoked fears of limits on new data centers. UBS analysts say construction pauses could threaten around 30% of expected US data-center capacity additions in 2028.
Priced for a collapse
Analysts still see Micron’s earnings climbing well past its fiscal 2023 loss:
Yet the stock traded at just 4.7x forward earnings at Thursday’s close, and only a bit higher today. That’s a third of its five-year average of 14x, close to where it sat at the last memory cycle’s peak in 2017 and 2018. Investors are betting on a repeat.
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The same bet, up and down the chain
Nvidia said in August that rising memory prices will push its gross margin to a low of 71% to 72% in the January quarter: memory makers’ pricing power at work. Nvidia reports Nov. 17.
Seagate’s revenue jumped 61% to $4.2 billion in the quarter ended Oct. 2, and it guided the December quarter to $4.8 billion. Yet it gets 13x forward earnings, more than twice Micron’s multiple. If investors trust Seagate’s demand that much, why not Micron’s?
For Applied Materials, DRAM was 26% of chip-equipment revenue in the quarter ended July 26, up from 22% a year earlier. Bloomberg’s report that Micron paused a $4.5 billion Taiwan plant is a small dent in that, so watch what Applied says about memory makers’ 2027 spending when it reports Nov. 12.
December is the next test
I think the market is too harsh on fiscal 2027: Micron says over 75% of its 2027 output is already committed. That makes the stock look like a bargain, even after today’s jump.
Micron reports Dec. 16, for a quarter whose 86.25% guided gross margin management calls the floor for fiscal 2027. And 2028, the year UBS flagged, is when analysts expect a record $207.76 of EPS. If data-center limits start biting then, those estimates would come down fast.
So what is Micron stock actually worth?
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Disclaimer:
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