Micron (NASDAQ: MU), one of the world’s largest producers of DRAM and NAND memory chips, is usually considered a cyclical stock. Its sales and profits soar when memory chip supplies are tight, but decline when those shortages become gluts.
Investors often try to buy Micron’s stock at the top of that cycle and sell it at the bottom, but those cycles are notoriously difficult to predict. But it’s also tough to be a long-term investor.
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Over the past decade, Micron’s stock has rallied 5,410%. But along the way, it suffered peak-to-trough declines of 73% from 2014 to 2016, 55% in 2018, 43% in 2020, 51% in 2021, and 36% in 2024. It took a lot of patience to hold the stock through those downturns.
However, you could have smoothed out those returns with dollar-cost averaging by nibbling on the stock each month rather than investing a lump sum. If you had invested $100 per month in Micron ten years ago and reinvested your dividends, your $12,000 principal would be worth more than $132,000 today. That’s an impressive gain, but a bolder lump sum investment of $12,000 in the stock ten years ago would have grown to more than $660,000.
Investors might be reluctant to buy Micron’s stock after those multibagger gains, but it’s currently firing on all cylinders as the AI market expands. Let’s see what could happen if you invest $100 in Micron per month through the end of 2030.
What will happen to Micron over the next few years?
In the past, Micron’s growth was tightly tethered to cyclical markets like PCs, smartphones, and cars. Micron and its peers produced more chips to support those markets as they expanded, but they often ended up with excess inventory when those growth cycles ended.
But over the past two years, the AI market‘s growth created a massive demand for high-bandwidth memory (HBM) chips, which are paired with Nvidia‘s (NASDAQ: NVDA) data center GPUs in AI clusters, and NAND-powered solid-state drives (SSDs) for storing that data.
Manufacturing HBM chips requires three times the wafer capacity as a standard DRAM chip, so Micron curbed the production of its DRAM chips to produce more HBM chips. Its closest competitors — Samsung and SK Hynix (NASDAQ: SKHY) — implemented that same strategy.
That’s why memory chip supplies will remain tight, and prices will remain high, as long as the AI market keeps expanding. The bulls believe this “supercycle” — which is directly tethered to Nvidia and other top AI chipmakers — will last much longer than its previous growth cycles.
