Will Micron Soar After June 24?

When you think about artificial intelligence (AI), the name Nvidia might be the first to come to mind. That's because the company designs one of the most crucial AI tools: the graphics processing unit (GPU), or the powerful chip that drives the training of models and AI's use across real-world problems.

But Nvidia isn't the only company that's offering a product critical to the development of AI. Another player that's in this category is Micron Technology (NASDAQ: MU), a maker of memory and storage solutions. Micron may not have attracted as much attention as Nvidia in the early days of the AI boom, but it's seen a similar growth pattern in recent quarters -- and like Nvidia, may continue to benefit as this AI story progresses.

The stock has been a big winner, gaining more than 200% this year alone. Now the question is, will Micron soar after a key event on June 24? Let's find out.

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Record quarterly revenue

As mentioned, Micron delivers something that's unavoidable: memory and storage needed throughout various AI processes. And this has helped revenue to skyrocket. In the latest quarter, for example, revenue surged nearly 200% to more than $23 billion -- and it represented the fourth straight quarterly record. Micron's DRAM, a form of working memory, revenue jumped 207%, while NAND, memory that stores data, climbed 169%. DRAM and NAND needs are particularly high for AI workloads. Importantly, Micron's profitability on sales is strong, with gross margin of 75% reaching a company record.

And speaking of records, Micron reached its highest level ever across earnings per share and free cash flow, too. The company also predicted records for the coming quarter, the fiscal third quarter.

Though Micron faces competition from other memory companies, demand has been so high that many players have benefited and should continue to do so. On top of this, as AI shifts into its next stage of growth, Micron and peers may see even more need for their solutions. We're moving into the stage of AI agents -- this involves AI considering problems and taking steps to address them -- and memory and storage are needed throughout the process.

Micron faces supply constraints

In fact, Micron's biggest challenge right now is keeping up with demand. Supply constraints mean the company is only able to serve about half to two-thirds of its biggest customers' demand in the medium term. The tight supply is expected to continue at least through this year.

Now, let's consider what's set to unfold on June 24: Micron's fiscal third-quarter earnings report. There's reason to be optimistic about many of the company's metrics, considering comments about demand during the last report and Micron's forecast for additional records. Still, any slight disappointment in revenue or forecasts or signs that Micron might further struggle to supply key customers could weigh on investor sentiment. After its blowout second-quarter earnings report, the stock fell more than 3% in the following trading session -- this may have been due partially to worries about the supply constraints limiting growth. But profit-taking, as longtime investors locked in some gains, also could have contributed to the drop.

Micron's valuation

So, will Micron soar after June 24? Not necessarily. It's important to keep in mind that the company's massive gain so far this year might make investors think twice before jumping in. The stock remains reasonably priced at 16x forward earnings estimates, but at the same time, valuation has climbed. This might prompt some investors to wait for a possible dip before buying the stock.

However, there's one final thing to keep in mind. Recent gains have pushed Micron to about $1,000 per share. If, during the earnings report, the company announces a stock split, a move to bring down that per-share price, it could be seen as positive -- and the stock might jump.

Otherwise, I wouldn't expect a huge gain on Micron right after June 24, but that doesn't mean you should avoid this hot stock. It is still well-positioned to advance over the long run thanks to its key role in the AI growth story.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.