It took computer memory company Micron Technology (MU +10.21%) 20 years to regain the highs it had achieved during the dot-com bubble at the turn of the century. But since finally hitting a new all-time high again in 2021, Micron stock has continued to soar. Indeed, Micron stock is up nearly 400% in just the last three years.
With Micron soaring to new highs, investors are clearly enthusiastic. But on Dec. 17, Micron reported financial results for its fiscal first quarter of 2026. And it turns out that investors may not be enthusiastic enough.
Image source: Getty Images.
The business trends are so favorable for Micron right now that investors may be underappreciating its potential over the next three to five years. And it's why Micron stock could still enjoy some more upside from here.
The big-picture trend
Investors tend to fear buying Micron Technology stock because it's a historically cyclical business. The chart below shows the ups and downs from 2005 through 2020.
However, a significant trend is currently underway that may finally help Micron break free from its historical cyclicality.
The secular trend, of course, is artificial intelligence -- investors have heard plenty about AI in recent years. But there is plenty of work still to be done to build out the AI infrastructure needed to achieve their goals.
NASDAQ: MU
Key Data Points
Data centers have been heavily featured in the news cycle this month. Major tech giants are building new data centers and filling them with graphics processing units (GPUs) from Nvidia. These GPUs supply the computing power needed to do useful things with AI. However, there is much more to the AI technology stack than just GPUs.
AI has thus far centered on generative AI. With these applications, the AI models find generalities from large datasets and use them to create new things. But generative AI is starting to take a back seat to agentic AI. And this is fueling new hardware needs in data centers.
The shift to agentic AI -- where the AI is working on behalf of the user in a personalized way -- is one that requires more computer memory than before. And it's why computer memory businesses have more demand than they can handle right now.
Why Micron is suddenly a hot business
For Q1, Micron's revenue was up a stunning 57% year over year and up over 20% just from the previous quarter. And this isn't a one-off. It could be the new normal.
For the upcoming fiscal second quarter of 2026, Micron's management is guiding for revenue of $18.7 billion. If it hits this guidance, it would be a 132% year-over-year increase, within reach of its all-time fastest growth rate that occurred back in the dot-com bubble.
One of the things driving growth for Micron is demand for high-bandwidth memory (HBM). The AI trend doesn't only need memory, but it also needs fast memory. And Micron is a market leader in HBM.
According to management, the HBM market is expected to triple from 2025 through 2028. In other words, demand for Micron's hottest product is expected to shoot up over the next three years. Perhaps it's not surprising then that the company has already sold out its supply for 2026, and discussions with its customers for subsequent years are already underway.
In past cycles, Micron has had too much supply when demand tapers off, leading to lower profit margins. But that's been true of many semiconductor players, including makers of GPUs. This time, the AI trends have sustained GPU demand far better than many expected.
Nvidia's chart demonstrates what can happen when demand exceeds supply by a large margin for a long time. Nvidia's profit margins are 60% higher than its 10-year average, as the chart shows.
NVDA Profit Margin data by YCharts
Don't look now, but a similar trend appears to be underway with Micron. In Q1, the company achieved a profit margin of 38%. For perspective, its 10-year average profit margin is 14%, according to YCharts. And for the upcoming Q2, management expects earnings per share (EPS) of $8.19. That's more than the company has made in most years of its existence.
If Micron's revenue continues to grow over the next three years, in alignment with management's commentary, then the company could enjoy profitability like never before. For this reason, I believe Micron stock can keep soaring, even after jumping by so much in recent years.
