24/7 Wall St. argues memory cyclicality has ended, prompting continued accumulation of Micron shares amid surging AI demand.

I continue to accumulate shares of Micron Technology (NASDAQ: MU) because, for the first time in my investing career, the memory sector is operating like a utility rather than a volatile commodity market. I have watched this industry erode shareholder value through decades of boom-and-bust cycles, but I am now convinced that the artificial intelligence era has fundamentally altered that pattern, rewarding patient capital.

During the June earnings call, CEO Sanjay Mehrotra told investors that “the memory industry has been structurally transformed by the proliferation of AI,” adding that Micron expects supply constraints to persist beyond calendar year 2027. This represents a multi-year structural shortage. High-bandwidth memory (HBM) has evolved from a standard DRAM commodity into an architectural bottleneck integrated into every AI accelerator. As AI memory shifts from a commodity to a critical infrastructure component, Micron remains the sole U.S.-based memory manufacturer positioned to capture this demand.

The financial metrics confirm that we are no longer observing typical cyclical peaks. In fiscal Q3 2026, revenue reached $41.456 billion, a 345.7% increase year over year, driven by non-GAAP earnings per share of $25.11—marking the seventh consecutive quarter of EPS beats. Non-GAAP gross margins hit a company record of 84.9%, while free cash flow surged to $18.304 billion in a single quarter. For context, full fiscal 2025 revenue totaled $37.378 billion, meaning Q3 alone surpassed the entirety of the prior fiscal year.

Crucially, Micron’s Strategic Customer Agreements (SCAs) now provide what the memory industry has historically lacked: contracted floor pricing. The company has secured 16 SCAs generating $22 billion in deposits and financial commitments, with approximately $100 billion in cumulative remaining performance obligations across 14 of those contracts. Management noted that these floor-price margins would be “well beyond the peaks that we experienced” in previous cycles, effectively signaling the end of traditional boom-and-bust volatility.

Despite this operational shift, the valuation still presents a compelling entry point. At $1,011.75 per share, Micron trades at a forward price-to-earnings ratio of 6, which appears discounted relative to fourth-quarter guidance of $50 billion in revenue and $31.00 in EPS at the midpoint. The analyst consensus target stands at $1,501.98, supported by 40 Buy ratings and zero Sell ratings.

While I could allocate capital to other premier AI beneficiaries like NVIDIA (NASDAQ: NVDA) or Broadcom (NASDAQ: AVGO), neither currently trades at a single-digit forward multiple. Micron’s forward P/E of 6, paired with visible pricing power reflected in an 80.4% operating margin, represents a persistent market mispricing I intend to exploit. Among storage peers, Western Digital (NASDAQ: WDC) offers the closest comparison but lacks meaningful HBM exposure. Micron has already shipped over $1 billion in HBM4 revenue, with its 12-high stack ramp tracking twice as fast as its predecessor.

Capital intensity remains the primary concern. Third-quarter capex totaled $7.826 billion, with roughly $10 billion guided for the fourth quarter. The dot-com parallels that recently garnered 2,216 upvotes on r/wallstreetbets warrant serious consideration, as does the concentration risk tied to Micron’s lead HBM4 customer. However, the SCA framework fundamentally alters the risk profile: take-or-pay agreements backed by cash deposits already sitting on the balance sheet create a setup that differs materially from the speculative excesses of 1999.

The balance sheet reflects this stability. Shareholders’ equity has climbed to $100.724 billion, with $24.995 billion in cash. Management has committed to returning 100% of excess cash to shareholders over time, beginning in December 2026. I own a compounding memory utility currently priced as a cyclical stock, and I will continue accumulating shares until the broader market recognizes the distinction.

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