Micron Rides on DRAM Demand Wave: Can the AI Boom Keep Aiding Growth?

Micron Technology, Inc. MU is witnessing strong momentum from its DRAM business. The business unit’s revenues soared 51% year over year and 15% sequentially to $7.1 billion in the third quarter of fiscal 2025. Micron’s DRAM business accounted for 76% of its total third-quarter revenues of $9.3 billion. This surge was fueled by record demand from the data center end market, where high-capacity and low-power DRAM are essential to run complex workloads.

The artificial intelligence (AI) boom has been central to this momentum. High-performance servers running large language models require massive amounts of DRAM, and Micron’s portfolio of high-capacity modules and power-efficient LPDRAM has positioned it as a key supplier. The company’s technology transitions, such as 1-gamma DRAM, are also helping it deliver better performance and power savings, a critical requirement for handling AI workloads.

Micron projects that the industry-wide DRAM bit demand will grow in the high teens for 2025, suggesting further momentum in this business for the company. Additionally, continuous improvement in DRAM pricing, along with cost efficiencies, will boost gross margins.

Management expects the DRAM supply-demand balance to tighten further in the coming quarters, driving additional pricing strength. This will support Micron’s margin expansion and profitability, especially as AI-related DRAM demand accelerates.

Micron is set to report fourth-quarter fiscal 2025 results on Sept. 23, and analysts are expecting strong growth in DRAM revenues. The Zacks Consensus Estimate for fourth-quarter DRAM revenues is pegged at $8.69 billion, indicating a robust 63% year-over-year increase and a 23% sequential rise.

How Do Micron’s Rivals Stack Up in the Memory Chip Race?

Although there are no U.S. stock exchange-listed direct competitors for MU in the memory chip space, Intel Corporation INTC and Broadcom Inc. AVGO play key roles in the HBM supply chain and AI hardware ecosystem.

Intel is developing its AI accelerators that rely on high-performance memory like HBM. Although Intel doesn't manufacture HBM chips, its Gaudi AI chips will require a robust HBM supply, and any shift in memory partnerships could impact Micron's position.

Meanwhile, Broadcom designs custom application-specific integrated circuits used in AI infrastructure that often include integrated HBM. As demand for Broadcom’s AI chips grows, it could influence how HBM suppliers like Micron allocate their future supply.

Micron’s Price Performance, Valuation and Estimates

Shares of Micron have risen around 40.8% year to date compared with the Zacks Computer – Integrated Systems industry’s gain of 25.4%.

From a valuation standpoint, MU trades at a forward price-to-sales ratio of 3.58, slightly higher than the industry’s average of 3.46.

The Zacks Consensus Estimate for Micron Technology’s fiscal 2026 earnings implies a year-over-year increase of approximately 62.4%. Estimates for fiscal 2026 have been revised upward in the past 30 days.

Micron Technology currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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