Is Micron Starting an Nvidia-Style Run?
Key Points
Micron's growth is accelerating, similar to what Nvidia experienced a few years ago in the early stage of the AI boom.
Memory markets have historically been cyclical, but Micron's CEO sees a 20-year growth cycle driven by robotics.
Morgan Stanley expects nearly 1 billion robots to be deployed globally by 2050, potentially opening a large addressable market for memory chips.
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Micron Technology (NASDAQ: MU) reports surging demand for memory in data centers, and that is helping drive the stock price up more than 553% over the past year. The company's revenue guidance of $33.5 billion for the current quarter is almost equal to its total revenue in the prior fiscal year.
That kind of acceleration is similar to what Nvidia experienced early in the data center boom, when exploding demand for artificial intelligence (AI) chips pushed data center revenue sharply higher. Over the last five years, its data center revenue increased by more than 1,000%, driving the stock up roughly 1,220% at the time of writing.
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Micron's biggest risk is the cyclical nature of the memory market. Prices can swing quickly, which makes results volatile for Micron and the entire industry. But the growth of physical AI products, such as humanoid robots, might change industry dynamics. If high-bandwidth memory and related products become core building blocks of the AI build-out, Micron may have more upside than investors expect, especially given its current price-to-forward-earnings ratio of 7.
CEO Sanjay Mehrotra believes Micron is at the very beginning of a long-term growth cycle. During the last earnings call in March, he said, "We believe we are on the cusp of a 20-year growth vector in robotics and expect robotics to become one of the largest product categories in the technology world."
Humanoid robots will have on-board AI capabilities, making them walking, portable data centers. This could drive another wave of memory demand. Morgan Stanley analysts forecast the installed base of robots could reach nearly 1 billion by 2050. If memory becomes one of the most critical components in robotics, the addressable market could be enormous for Micron.
Micron may remain a cyclical business. But it could still see higher peaks and valleys in revenue over the next few decades. For investors looking for a catalyst that may not be priced into the stock and could drive more upside for Micron over the next several years, as Nvidia experienced, robotics could be that opportunity.
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John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.
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