Micron Trades At Just Over 6 Times Forward Earnings As AI Memory Pricing Debate Intensifies

According to CNBC, Micron Technology shares have more than tripled this year and trade at just above 6 times forward earnings, making the stock one of the cheapest in the S&P 500 despite its rally. The article says the debate centers on whether Micron’s memory business is still as cyclical as in past semiconductor cycles or whether long-term customer agreements, including price ceilings, floors, binding volume commitments and take-or-pay provisions, are reducing earnings volatility. The piece says Nvidia Chief Financial Officer Colette Kress told analysts after Nvidia reported earnings Wednesday evening that component costs have risen significantly and that the company is seeing extreme pricing conditions in memory. Micron, one of the three major suppliers of high-bandwidth memory used in AI systems, briefly opened about 3% higher on Thursday before ending lower. D.A. Davidson’s Gil Luria attributed part of the move to a broader trading unwind, with some investors selling semiconductors after software stocks rebounded sharply. Micron has said the agreements generally extend through 2030 and that, once planned agreements are completed, roughly half or more of company revenue should be covered by them. Management has also said that minimum prices in contracts with price bands would still imply gross margins well above the company’s peak quarterly margins in previous memory cycles.