The AI Memory Supercycle Could Last Longer Than Investors Expect. That's Great News for Micron and Sandisk.
The AI Memory Supercycle Could Last Longer Than Investors Expect. That's Great News for Micron and Sandisk.
Marc Guberti, The Motley FoolSun, June 28, 2026 at 12:45 PM UTC
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Key Points -
Micron smashed expectations, and it couldn't have gone much better for investors who are bullish on memory stocks.
Multiple memory companies are shifting to multiyear contracts with tech giants to secure meaningful revenue visibility.
As companies continue to deliver superb results, it will increase the price of memory chips and reduce the likelihood of a future supply glut.
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The latest earnings for Micron(NASDAQ: MU) didn't just show that the supercycle in memory chip stocks is still in session. Its third-quarter fiscal 2026 results showed that the biggest bulls underestimated the growth of the memory industry and that the supercycle is still in its early stages.
Even though Micron, Sandisk(NASDAQ: SNDK), and other memory companies have mostly gone parabolic over the past year, there is still more room for them to run.
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Discussing Micron's earnings
Many investors held their breath waiting for Micron's earnings to come out. Any misses would have dragged down memory stocks and caused investors to worry that the supercycle was slowing down. Meeting expectations may not have been enough, but it would have at least confirmed that the memory industry is still going strong.
It turns out Micron left no room for doubt. Revenue more than quadrupled year over year in the third quarter (ended May 28), breezing past prior guidance. Management had told investors to expect $33.5 billion in quarterly revenue, and it ended up delivering $41.5 billion.
Naturally, Micron soared in after-hours trading, but Sandisk also rallied tremendously as if it were the company that reported earnings that day. It might as well have done just that. Micron's earnings offer a sneak peek at what other memory players will do. Sandisk actually had a higher growth rate than Micron if you look at Micron's previous quarter, so investors are expecting something substantial when Sandisk reports in August.
Commentary offers more optimism for the memory boom
It wasn't just Micron's $41.5 billion in third-quarter revenue, or guidance that implies $50 billion in the current quarter, that showed the memory boom is still strong. CEO Sanjay Mehrotra had some remarks that show demand for memory products is not slowing down: "Micron is investing at record levels in technology, products and supply to address our customers' rapidly growing demand. We believe our multiyear Strategic Customer Agreements will significantly enhance the durability and predictability of Micron's strong financial performance."
These statements offer key details. First, Micron is still investing at record levels. The decision to ramp up spending suggests that customer demand will continue to soar for multiple years. Management would not be boosting its investments if it believed this was a short-term cycle.
The company also cited multiyear deals that will help sustain its financial success over the long run. It doesn't seem like a repeat of 2023, when a supply glut and dropping memory prices hurt revenue and profits. That was before infrastructure for artificial intelligence (AI) became the centerpiece of technological innovation and AI became the term of the moment among investors.
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An inflection point for memory storage
When Sandisk reported its fiscal 2026 third-quarter results, its CEO referred to this moment as an inflection point. The company's next earnings report will give an idea of what the company was doing while Micron quadrupled its revenue year over year.
It also mentioned multiyear customer engagements with "firm financial commitments." This theme of multiyear contracts provides more revenue visibility in a cyclical industry. Furthermore, the surging demand for memory products should be enough to keep prices elevated for a longer period of time. And that will help companies like Micron and Sandisk preserve their high margins.
Investors watched with amazement as Nvidia reached a $5 trillion market cap last year. There was a lot of hoopla about AI bubbles and semiconductor stocks being drastically overvalued through Nvidia's path to becoming the world's most valuable publicly traded company.
Memory stocks like Micron and Sandisk have been battered constantly about bubble concerns. Ignoring the fundamentals and focusing on recent stock gains can lead to such conclusions. Micron, for example, is up by more than 700% over the past year.
However, the price movements of these stocks are based entirely on fundamentals. When revenue and guidance continue to marvel investors, it's no wonder the stocks keep rallying despite their superb year-to-date gains. The memory supercycle appears alive and well.
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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.
Source: “AOL Money”
