Why Micron Technology Stock Rallied Today
Key Points
Micron stock jumped after rival SK Hynix reported record growth.
The company also predicted that the ongoing boom for memory chips will continue through the end of the decade.
As one of the Big Three memory chipmakers, Micron will continue to profit from the demand.
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Shares of Micron Technology (NASDAQ:MU) popped on Wednesday, jumping as much as 5.5%. As of 11:31 a.m. ET, the stock was still up 4.8%.
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The catalyst that sent the semiconductor specialist higher was a rival's robust financial report.
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Show me the money
Korean memory chipmaker SK Hynix (NASDAQ:SKHY) reported its fiscal 2026 third-quarter results, and investors were clearly impressed. The company reported record revenue of 104.6 trillion South Korean Won (roughly $78.9 billion), up 328% year over year and 32% quarter over quarter. At the same time, operating profit of 83.3 trillion won (roughly $61.7 billion) soared 632% year over year and 38% sequentially.
For context, analysts' consensus estimates called for revenue of 98.34 trillion won and operating profit of about 76.7 trillion won, so the results easily surpassed investor expectations.
However, what really turned heads was management commentary about the state of the industry. SK Hynix's outlook speaks volumes: "Demand [is] expected to outpace supply through 2030." The company also noted that its supply is essentially sold out for the next three years. There have been fears that demand for memory chips would begin to decline starting in 2028, so this pronouncement was cheered by investors.
The company also announced that it would return 100 trillion won to shareholders, including at least 30 trillion won in cash dividends and 60 trillion won via share buybacks.
As one of the Big Three computer memory manufacturers, Micron will benefit from the ongoing demand for High-Bandwidth Memory (HBM), Dynamic Random-Access Memory (DRAM), and NAND flash memory chips -- all critical to the ongoing adoption of artificial intelligence (AI).
Despite stock price gains of more than 340% over the past year (as of this writing), Micron stock is selling for just 13 times earnings, a valuation that is all the more attractive given that the company continues to deliver revenue and profit growth in the triple digits. Moreover, SK Hynix seemed to confirm that the current demand cycle will continue for several more years, and Micron has adopted measures to lock its major customers into multi-year, non-cancelable contracts, thus ensuring the boon continues.
That's why Micron stock is still a buy.
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Danny Vena, CPA has positions in Micron Technology. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
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