Key Takeaways
- Dan Niles says China’s CXMT holds about 8% of the DRAM market and aims for 20% by 2028, the year analysts expect Micron’s highest earnings yet.
- Micron’s record fiscal 2026 came mostly from higher memory prices, so new Chinese supply threatens the source of its profits.
- SK hynix expects demand to outrun supply through 2030, and Micron’s contracts cover over 35% of its revenue through 2030, but most of Micron’s sales still reprice with the market.
- At 5x forward earnings, Micron trades near its 2017-2018 levels, when the last memory cycle peaked, and its Dec. 16 report is the next check on its 2028 supply outlook.
Memory stocks bounced before Monday’s open after last week’s AI selloff. SK hynix (SKHY) rose 5% premarket, and Micron Technology (MU) rose 2%.
Dan Niles, founder and portfolio manager of Niles Investment Management, isn’t sold on the longer run. A follower on X asked him over the weekend whether stocks like Micron would make new highs. In his reply, he granted that bulls “will point to the share buybacks, low PE ratios and long-term supply agreements through ~2030+.”
Then he got to his real worry: “China is bringing on a lot of capacity.”
He says China’s ChangXin Memory Technologies (CXMT) holds about 8% of the DRAM market today, with a goal of “20% by 2028.” He also says YMTC aims to be No. 1 in NAND by that same year.
Japan crushed the US memory makers in the 1980s, he notes, and Korea crushed Japan in the early 2000s. “I do not think this will end any differently with China and they have even more motivation.”
Which puts China’s deadline right in the middle of the years analysts expect to be Micron’s best.
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Analysts are counting on 2028
Analysts expect Micron’s normalized EPS to more than double, from $75.52 in fiscal 2026 to $176.50 in fiscal 2027, then climb to $207.76 in fiscal 2028. That fiscal year ends in August 2028.
Analysts do expect a fade, just a later one: consensus has Micron’s gross margin falling from 87.0% in fiscal 2027 to 65.5% in fiscal 2030 as new fabs come online. If CXMT gets anywhere near its goal, that fade could arrive while the estimates still call for record earnings.
Micron’s record came from prices
Timing matters because Micron’s record year came from prices. In fiscal 2026, its DRAM prices rose about 180%, while the bits it shipped rose only in the mid-20% range, the company says in its annual report. DRAM made up 75.6% of revenue.
Micron’s gross margin follows those prices hard, in both directions. It fell from 45.2% in fiscal 2022 to 2.7% a year later, then soared to 80.7% in fiscal 2026.
Niles also says fourth-quarter memory price increases are coming in below what was expected a quarter ago. And Micron’s own management expects industry DRAM bit shipments to grow in the low 20% range in both 2027 and 2028.
My read: if CXMT gets close to 20%, either it takes that growth from Micron and the other incumbents, or supply grows faster than Micron’s plan. Either way, that’s bad for prices.
The contracts cover about a third
The bulls’ best answer came from Korea last week. SK hynix forecast with its third-quarter results that memory demand will keep outrunning supply through 2030. Micron says over 75% of its 2027 output is already committed. Management also estimates that its 26 multi-year supply contracts cover over 35% of revenue through 2030.
Even so, most of Micron’s sales are still priced by the market. And the floor for the next year is thin. Micron’s annual report puts its contracted minimum revenue at about $134 billion as of Sept. 3, with about a quarter of it due within 12 months. That’s roughly $34 billion, against the $275.5 billion of revenue analysts expect in fiscal 2027.
Cheap for a reason
The low multiple Niles mentions is real too. Micron trades at 5x forward earnings, close to where it sat in 2017 and 2018, when the last memory cycle peaked. Its earnings then fell 79%, from $11.51 a share in fiscal 2018 to $2.37 in fiscal 2020.
Investors are already pricing today’s earnings as a peak, and the cheap multiple didn’t stop the fall last time.
I’m with Niles on this one. Micron’s contracts and its cash pile should soften any landing. But analysts still have its best year in 2028, the year CXMT wants 20% of DRAM, and Micron’s record was built on prices that new supply would push down. I’d let this bounce go by.
Of course, CXMT still has to build that capacity. We’ll get the next read with Micron’s Dec. 16 report: if management holds its 2028 supply outlook, the shortage has more room to run than Niles thinks.
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