Will AI Servers Keep Micron Technology's DRAM Demand Momentum Strong?

Micron Technology, Inc. MU is becoming a key beneficiary of the ongoing artificial intelligence (AI) boom, which is reshaping demand trends across the semiconductor space. At the center of this shift is DRAM, which plays a critical role in powering AI servers and high-performance computing systems.

AI servers require far more memory than traditional servers, especially for training and inference tasks. High-capacity and high-bandwidth memory (HBM) is now essential to keep graphics processing units and custom accelerators fully utilized. This trend is pushing up both DRAM content per server and average selling prices, directly benefiting Micron Technology’s DRAM business.

In the second quarter of fiscal 2026, MU’s DRAM revenues soared 207% year over year and 74% sequentially to $18.8 billion and accounted for 79% of total revenues. The robust sequential increase was mainly driven by mid-single-digit growth in bit shipments and a mid-60s percentage rise in average selling prices.

Micron Technology’s DRAM business is benefiting from a strong demand for HBM. Its HBM3E products are attracting significant interest for their superior energy efficiency and bandwidth, which are ideal for AI workloads. The company has noted that its supply of HBM3E and next-generation HBM4 chips for the calendar year 2026 has already been sold out.

Tight DRAM supply is another factor supporting Micron Technology’s growth outlook. Limited industry capacity additions are expected to keep supply constrained, giving Micron Technology greater pricing power. At the same time, broader demand from AI personal computers, smartphones and automobiles is adding more support to DRAM consumption. Considering the company’s third-quarter top-line guidance of $35.5 billion, DRAM revenues may reach $28 billion, given 79% contribution from the segment. This translates to year-over-year growth of 295%.

Micron’s Rivals in the Memory Chip Race

Although there are no U.S. stock exchange-listed direct competitors for MU in the memory chip space, Intel Corporation INTC and Broadcom Inc. AVGO play key roles in the HBM supply chain and AI hardware ecosystem.

Intel is expanding its AI memory chip portfolio by integrating HBM into its high-performance accelerators. The company's flagship AI accelerator, the Gaudi 3, features 128GB of HBM2e memory to provide high memory bandwidth for large-scale AI training and inference workloads.

Broadcom is expanding its AI chip business by developing high-performance custom AI accelerators and integrated advanced networking solutions that enable hyperscalers to utilize vast amounts of HBM effectively. Broadcom is co-designing and producing proprietary custom AI chips for companies like OpenAI, Google, Meta and ByteDance.

Micron’s Price Performance, Valuation and Estimates

Shares of Micron Technology have surged around 369% over the past year compared with the Zacks Computer – Integrated Systems industry’s gain of 110.6%.

Micron One-Year Price Return Performance

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From a valuation standpoint, MU trades at a forward price-to-earnings ratio of 10.37, significantly lower than the industry’s average of 15.29.

Micron 12-Month Forward P/E Ratio

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The Zacks Consensus Estimate for Micron Technology’s fiscal 2026 and 2027 earnings implies a year-over-year increase of 336.4% and 51.4%, respectively. Bottom-line estimates for fiscal 2026 and 2027 have been revised upward in the past seven days.

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Micron Technology currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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