Epic Chart Breakout For Micron Technology; SanDisk Looks Cheap

Micron Technology is the big beast in the memory business, and it is growing at an incredible rate.

• Micron delivered an exceptional fiscal Q2, with stellar records in
  revenue, gross margin, EPS (earnings per share) and free cash flow.
• Quarterly revenue nearly tripled versus one year ago, and revenue for
  DRAM, NAND, HBM (high-bandwidth memory) and each business
  unit reached new highs.
• Our fiscal Q3 single-quarter revenue guidance exceeds the full year
  revenue for every year in our company’s history through fiscal 2024.
• For fiscal Q3, we anticipate exceptional records across revenue, gross
  margin, EPS and free cash flow.
• Reflecting confidence in the sustained strength of our business, I am
  pleased to announce that our board has approved a 30% increase in
  our quarterly dividend.

The following winds driving the business could hardly be stronger.

• The step-up in our results and outlook are the outcome of an increase
  in memory demand driven by AI, structural supply constraints and
  Micron’s strong execution across the board.
• Our memory and storage solutions are at the heart of this AI revolution.
• Memory makes AI smarter and more capable, enabling longer context
  windows, deeper reasoning chains and multi-agent orchestration.
• As AI evolves, we expect compute architectures to become more
  memory-intensive.
• This is why we strongly believe that Micron is one of the biggest
  beneficiaries and enablers of AI.
• AI hasn’t just increased demand for memory — it has fundamentally
  recast memory as a defining strategic asset in the AI era.

As with SanDisk the business model is changing.

• We continue to work with customers on strategic customer agreements
  — or SCAs — that are different from prior LTAs (long-term agreements)
  and have specific commitments over a multi-year time horizon for
  improved visibility and stability in our business model.
• These SCAs also provide customers greater certainty to plan their
  businesses while reinforcing long-term engagement across our broad
  product portfolio.
• We are excited to have signed our first five-year SCA.

AI has hit the memory industry and Micro’s business like a tsunami.

• We are making excellent progress ramping our industry-leading 1γ
  (1-gamma) DRAM and G9 NAND technology nodes.
• We expect 1γ to become the highest-volume node in Micron’s
  history.
• Our 1γ node was already the fastest ramp to mature yields, is ramping volumes faster than all prior nodes in our history and is on track to become a majority of our DRAM bit mix by mid-calendar 2026.
• We plan to increase EUV (extreme ultraviolet) adoption at the 1δ (1-
  delta) DRAM node utilizing the latest-generation EUV tools.
• These more advanced EUV tools will help us optimize bothbcleanroom space efficiency and patterning when scaling to 1δ and beyond.
• In NAND, our G9 node also remains on track to constitute a majority
  of bits by mid-calendar 2026. We also achieved a record mix of QLC
  (quad-level cell) bits in the quarter.
• Looking ahead, we expect co-location of R&D (research and development) and high-volume manufacturing at our Boise and our Singapore sites to speed up time to market for our leading edge products.
• We see an unprecedented set of opportunities for memory and storage to enable the AI era across market segments and expect to meaningfully increase our R&D investments in fiscal 2027.
• Micron’s technology leadership, product excellence and manufacturing execution is being recognized in quality scores from our customers.
• I am pleased to report that a clear majority of our customers rank Micron No. 1 in quality.

This is what Micron had to say about NAND.

We are now seeing NAND demand significantly in excess of our available supply for the foreseeable future.

SanDisk is the NAND specialist and has just reported incredible results.

Revenue for the third quarter was $5.95 billion, up 97% sequentially and up 251% year-over-year. This compares favorably to our guidance of $4.4 billion to $4.8 billion and was driven by both a mix shift toward higher-value customers and higher pricing. Our bit shipments were flat year-over-year and down high-teens sequentially as we build higher inventory levels, primarily to support strong BiCS 8 QLC demand in the fourth quarter Stargate ramp and to prepare for our recently signed new business models. In line with our mid- to high-teens growth model, bit shipments increased 18% fiscal year-to-date. Moving on to the end markets. Sequentially, data center revenue grew 233% to $1.467 billion.

Edge grew 118% to $3.163 billion, and consumer came in at $820 million, down 10% in line with our historical seasonality. Our portfolio planning strategy focuses on delivering attractive long-term economics, with diversification remaining a core strength. We remain committed to serving all three end markets to maximize long-term value creation. Our non-GAAP gross margin for the third quarter was 78.4%, up from 51.1% in the prior quarter. This compares favorably to our guidance of 65% to 67% and was driven by our shift toward higher-value mix and the overall pricing environment.

The outlook for the next quarter is amazing.

For the fourth quarter, we forecast revenue between $7.75 billion and $8.25 billion from both bits growth and higher pricing. Our forecast for non-GAAP gross margin is between 79% and 81%. We expect non-GAAP operating expenses between $480 million and $500 million as we continue to invest in innovation and R&D. We expect non-GAAP interest and other income between $10 million and $30 million and non-GAAP tax expenses between $775 million and $875 million.

We forecast non-GAAP EPS between $30 and $33, assuming 158 million fully diluted shares. Moving to capital allocation. The priorities we outlined in February were to invest in the business, achieve a net cash position, and then return cash to shareholders. In line with these priorities, we have taken steps over the last two quarters to solidify our supply chain, including extending our JV with Kioxia through December 2034 and investing approximately $1 billion in Nanya to secure long-term DRAM supply. We have also taken actions that put us in a strong net cash position by paying off the remaining balance of our TLB.

Given the strong progress, today we are announcing that our board of directors has authorized a $6 billion share buyback program of outstanding shares of common stock. The repurchase authorization is effective immediately with no expiration date.

Something weird is happening with SanDisk, as the shares are becoming incredibly cheap. Analysts are talking about earnings per share reaching $1.55, even $1.65, which compares with a share price of $1248 as I write. The PE ratio for an explosively growing business is set to fall into single figures.

The bearish argument is that memory prices are freakishly high and set to collapse. There is no sign of this happening, and the companies don’t expect it. The other worry might be technology. As prices soar, the hyperscalers might try to replace the technology. Is that possible? I have no idea, but in the meantime, the memory companies have the expertise and are spending massively on research and development.

If they can offset rising prices by making memory more energy efficient, that would help, and they have every incentive to do that and make any other improvements they can. I think it is far too early to throw in the towel on these companies with decades of experience behind them and a demand explosion likely to stretch into the future.

In terms of sheer statistics, a price target of $3,000 for SanDisk and high targets for others in the industry look well within reach.

Listen to what Sanjay Mehrotra, CEO of Micron, has to say about what is happening.

The step-up in our results and outlook are the outcome of an increase in memory demand driven by AI, structural supply constraints, and Micron Technology, Inc.’s strong execution across the board. Our memory and storage solutions are at the heart of this AI revolution. Memory makes AI smarter and more capable, enabling longer context windows, deeper reasoning chains, and multi-agent orchestration. As AI evolves, we expect compute architectures to become more memory intensive. This is why we strongly believe that Micron Technology, Inc. is one of the biggest beneficiaries and enablers of AI. AI has not just increased demand for memory; it has fundamentally recast memory as a defining strategic asset in the AI era.

If you believe him, it is still early days for investing in these incredible businesses.

Share Recommendations

Micron Technology. MU

SanDisk. SNDK

XLK (see below)

David Goeckeler, CEO of SanDisk, says something similar.

In summary, we continue to execute with conviction at a critical inflection point for this business. NAND has always been a foundational technology, empowering the world’s best-in-class semiconductor storage solutions required to drive the largest technological movements, including PC, mobile, cloud, and now artificial intelligence. Data center has become our fastest-growing market, and the workloads driving that demand—including inference, reasoning, and agentic systems—represent a structural and durable shift in how the world’s most consequential technology is built and deployed. Our new business models reflect this shift.

Strategy – Don’t Let The Naysayers Frighten You

If you do find the memory stocks scary but want exposure to the technology boom, how about this one?

This is a perfect investment for widows, orphans, grandchildren, whoever. Whatever the twists and turns of the technology revolution, XLK should benefit. Megacaps dominate the fund, but if I am right and they should also be called the invincibles, that is no problem. Without the megacaps, there wouldn’t be a technology revolution.

Just as an aside, SK Hynix (formerly Hyundai Electronics), an explosively growing South Korean memory business, is not on the IG platform. I have told IG this, and I expect it to be added shortly. It is one of the big three alongside Micron and Samsung.

Among other opportunities, Micron sees huge growth ahead for robots.

• Rapid improvements in AI are supercharging the capabilities of robots.
• We believe we are on the cusp of a 20-year growth vector in robotics and expect robotics to become one of the largest product categories in the technology world.
• Humanoid robots will be AI-enabled and will be powered by a compute platform that rivals that of a high-end L4-capable automobile, thus requiring significant memory and storage capacity. We expect this exciting new category of growth to further underpin the long-term favorable dynamics that shape our industry environment.
• Micron is very well-positioned to leverage this opportunity in close partnership with our customers, enabled by our industry-leading technology, product solutions and operational capabilities.