Micron's DRAM Business Still Faces Commoditization Challenges

Micron Technology has outperformed expectations since a recommendation to avoid investing in the company. The surge in demand for DRAM due to the artificial intelligence wave has benefited Micron and its competitor SK Hynix. The company's stock has skyrocketed as a result.

Micron Technology (NASDAQ:MU) has seen a remarkable turnaround since a previous recommendation to avoid investing in the company. The surge in demand for Dynamic Access Random Memory (DRAM) due to the artificial intelligence (AI) wave has significantly benefited Micron, leading to a substantial increase in its stock price [1].

In the third quarter of fiscal 2025, Micron Technology's DRAM revenues grew by 51% year over year, reaching $7.1 billion. This segment, which accounted for 76% of the company's top line, was driven by strong growth in data center, automotive, PC, and mobile end markets [2]. The company's low-power server DRAM and high bandwidth memory (HBM) chips have seen a massive surge in use cases for AI workloads, contributing to this growth.

Micron Technology's DRAM segment experienced a sequential surge of 50% in HBM revenues, which drove DRAM revenues to a record high in the third quarter of fiscal 2025. The company expects industry DRAM bit demand to grow in the high-teens percentage range in calendar 2025, with low inventory levels in distribution channels supporting pricing and margins [2].

Micron's competitors in the DRAM market include Western Digital Corporation (WDC) and Seagate Technology Holdings plc (STX). However, Micron has been outperforming these competitors, with its stock gaining 38.2% year to date compared to the Zacks Computer - Integrated Systems industry's growth of 29.3% [2].

Despite the positive outlook, Micron's stock declined 3.9% in pre-market trading on Thursday after Goldman Sachs downgraded SK Hynix (KS:000660) from Buy to Neutral. The downgrade cited potential HBM pricing declines in 2026 and concerns about SK Hynix's operating profit outlook for next year [3, 4]. This negative sentiment towards SK Hynix has spilled over to Micron, causing a temporary drop in its stock price.

Looking ahead, Micron Technology's DRAM business is expected to benefit from higher-value product shipments and tight supply in leading-edge nodes. The Zacks Consensus Estimate for fiscal 2025 DRAM revenues is pegged at $27.95 billion, indicating year-over-year growth of 58.8%. The consensus mark for fiscal 2025 signifies total revenues to grow 46.5% to $36.79 billion [2].

References:
[1] https://seekingalpha.com/article/4803730-micron-stock-dram-still-commodity-reiterate-strong-sell
[2] https://www.theglobeandmail.com/investing/markets/stocks/MU/pressreleases/33472053/dram-demand-powers-micron-technologys-growth-will-the-momentum-last/
[3] https://www.investing.com/news/stock-market-news/micron-stock-falls-after-goldman-downgrades-peer-sk-hynix-4139499
[4] https://seekingalpha.com/news/4468463-micron-declines-after-competitor-sk-hynix-receives-downgrade-by-goldman-sachs