Micron Technology (NASDAQ: MU), which makes memory chips for computers and artificial intelligence (AI) servers, just posted a record year. On Sept. 30, it reported fiscal 2026 revenue of $133 billion and adjusted earnings of $75.52 per share — a massive jump from $8.29 a year earlier. Yet the stock closed on Oct. 28 about 13% below its earnings-day close.
Investors have seen this movie before. Memory booms have historically ended when new supply flooded the market, and prices fell. As of Oct. 28, the stock trades at a forward price-to-earnings (P/E) multiple of about 5.5 — a level that assumes a bust is near. By comparison, the S&P 500‘s forward P/E is about 19.
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Whether that’s the right valuation for Micron depends on two things: how much demand is already locked in, and how much new supply is on the way.
Long-term contracts lock in part of the demand
Micron’s answer to the demand question is a set of long-term strategic customer agreements (SCAs). It has signed 26 in which buyers must take set volumes or pay anyway, backed by $32 billion in customer financial commitments.
This won’t cover all future revenue, but these agreements should provide some degree of stability in pricing and earnings. That stability is one reason some investors argue the multiple is too low.
Moreover, the International Data Corp. (IDC) forecasts that server spending, where Micron’s chips are needed, will grow 28% annually to $1.58 trillion by 2030.
Record cash is funding new supply
The memory boom is filling Micron’s coffers. Adjusted free cash flow hit $33 billion last quarter and $62 billion for the full year.
That cash also funds capacity expansion. Micron spent about $27 billion on capital expenditures in fiscal 2026 and plans to spend about $25 billion in the first half of fiscal 2027, with more in the second half.
The risk is that new factories add supply, and when supply rises, memory prices decline, which usually ends memory booms.
Two numbers will show whether the shortage is ending
Micron’s SCAs cover over 35% of expected revenue through 2030, leaving up to 65% exposed. If supply catches up to demand, earnings and the stock could still fall.
To track the balance, there are two metrics to watch: selling prices for dynamic random access memory (DRAM) and days of inventory, which management reports each quarter.
