Micron’s profits keep climbing, but investors are paying less for each dollar of expected earnings. AI data centers have turned memory chips, which store data and keep it ready for processing, into a scarce resource. The question hanging over the industry is how long that shortage can keep profits this high.
Micron clears another high earnings bar
Micron Technology reported fourth-quarter revenue of $54.23B and adjusted earnings of $33.42 a share, beating analysts’ estimates for both. Revenue was just $11.31B in the same quarter a year earlier.
The company expects first-quarter revenue of $61.5B, plus or minus $1.5B, against an analyst average near $57B. Its adjusted earnings forecast of roughly $38.15 a share points to another increase in profitability.
Shares rose modestly in late trading after the release. The stronger outlook leaves investors weighing how much of today’s earnings can survive once supply catches up.
Low valuations come with a catch
Micron trades at about 7x expected earnings, down from nearly 12x in June. SK Hynix trades at roughly 4x, about half its June peak.
Those valuations can make memory stocks look inexpensive just as profits approach a peak. If chip prices fall and earnings shrink, the apparent bargain can disappear without the share price changing.
Memory makers argue that longer supply agreements will make this cycle more durable. Micron said in June that it expected half or more of its sales eventually to come from long-term contracts, giving it greater visibility into future business.
Bank of America analyst Vivek Arya wrote that falling valuations despite growing contract adoption suggest investors are still pricing in a cycle peak.
"The debate has very clearly shifted from 'How good can it get?' to 'How long can it stay this good?'"
Joseph Moore, Morgan Stanley
Memory funds concentrate the same risk
The Roundhill Memory ETF reached $26B in assets less than six months after its early April debut. Micron accounts for more than 26% of the portfolio, with Samsung and SK Hynix its next-largest holdings.
Together, those three companies represent nearly three-quarters of the fund. Investors get exposure to several memory makers, but much of their investment still depends on the same forces sustaining chip prices and profits.
Competing funds offer different combinations of that exposure. The Tuttle Capital Concentrated Memory Stack ETF includes equipment and infrastructure companies such as Advantest and Onto Innovation, while the Tema Memory ETF favors flash-storage makers including Sandisk and Kioxia.
The Kurv Memory Select ETF has more than 20% of its roughly $30M in assets invested in SK Hynix. Tema has nearly $90M, illustrating how much larger Roundhill remains than its newer competitors.
Roundhill CEO Dave Mazza said inflows during pullbacks suggest investors see declines as buying opportunities. That enthusiasm leaves fund buyers facing the same question as individual shareholders: whether strong earnings can last long enough to justify the investment.
More supply could change the economics
Higher memory prices are also raising costs for companies that buy the chips. Apple increased iPhone 18 Pro prices by $100 from the previous generation, passing some of the component pressure to customers.
Raising prices can help manufacturers protect margins, but it risks weakening demand. Companies selling cheaper phones have less room to absorb rising costs before passing them on.
New chip factories coming online over the next few years could ease the shortage. If supply grows faster than demand, memory prices and manufacturers’ margins could come under pressure.
Micron also has a nearer-term opportunity to return cash to shareholders. Buyback restrictions attached to its government manufacturing grants expire in December, after which the company plans to return all excess cash.
The latest forecast gives investors another quarter of expected growth, while the low earnings multiples reflect doubts about what follows. For memory stocks to remain cheap, today’s exceptional profits need to prove they have staying power.
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