I Just Bought Micron Stock. Here's Why

Micron Technology (NASDAQ: MU) has had a great year. It's up around 230% so far in 2026, making it the fourth-best-performing stock in the S&P 500 this year. Normally, you're supposed to buy a stock before it makes a run like that, but even after the run-up, I've decided to open a position in Micron.

Why? It seems as if some of Micron's old tendencies are a thing of the past.

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Micron is taking steps to reduce its cyclicality

Micron makes memory chips, and the industry is known to be cyclical. There isn't much that separates one memory chip manufacturer from another, so Micron has no pricing power. You can see this in action when you think about purchasing an aftermarket thumb drive or upgrading your computer's RAM. All components are about the same, but what really matters is how cheaply you can buy them.

The market goes through demand cycles that go up and down, and when it's swinging up, times are good for Micron and its peers. But when it's a downturn, they're stuck with excess inventory and can't sell any new production, so the companies, and thus the stock, struggle.

Right now, we're amid the biggest memory-demand wave ever seen, thanks to the intensity of the artificial intelligence build-out. All available production capacity for both types of memory chips (DRAM and NAND, both of which Micron makes) is currently consumed. Every memory chip company has said demand far exceeds capacity, causing prices to skyrocket.

The fear is that this demand wave will eventually fade, leaving Micron in a much worse state than it is now. However, Micron is taking steps to reduce the severity of the eventual downturn. Micron has now signed several deals with its clients that set floor and ceiling prices for memory chips, which will stabilize the market. Furthermore, these are take-or-pay agreements, so Micron has locked in an estimated 35% of its revenue through 2030. That's a huge step toward ending the cyclicality of Micron's business, as Micron is now being treated more like a true supplier rather than just a commodity dealer.

Another development is that Micron is partnering with Nvidia to create an industry-first custom memory chip for its GPUs. This will completely shift Micron's relationship with one of the biggest memory buyers in the world, which is a great thing for Micron.

Overall, Micron has taken steps to steady its business and reduce its dependence on cyclical demand. But the question remains: When will the AI demand wave wrap up?

The AI build-out just got extended

Most investors point to 2030 as the year when the AI build-out may slow, but Micron just informed investors that a few of its clients signed deals through 2031, indicating a longer time frame. Furthermore, conditions will get worse before they get better.

Conditions in the memory chip market were terrible for buyers in 2026, with far more demand than supply. However, Micron's management team noted that conditions will worsen still further in 2027 and 2028 due to lack of supply. While Micron is working on getting new production capacity running, it won't be until mid-2027 and into 2028 before significant supply is available. That means another couple of years of strong revenue growth, even after how much it grew in 2026.

All of this adds up to a stock that should behave like a normal big tech stock at least through the end of the decade. While I'm a long-term investor, the market is much more short-sighted, so that gives me plenty of time to invest in a company that's bound to continue growing as the AI build-out intensifies. I'm happy to own Micron shares and believe they will be highly profitable over the next few years.

But I'll also be keeping a close eye on memory chip market conditions, and if they deteriorate, I'll be moving on from the stock.

Keithen Drury has positions in Micron Technology and Nvidia. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.