What we learned from the world’s top producers
The world’s top memory chip manufacturers made plenty of headlines this week. Micron We deliver one of the strongest earnings reports of this AI cycle.
Micron posted revenue and earnings well ahead of already high expectations, with estimates pointing to a roughly 80% gross margin next quarter. And yet the stock sank.
The market’s reaction was similar to Nvidia’s earnings in late February, and what if a blockbuster edition can’t please investors?
In Micron’s case, the debate isn’t about whether the demand is genuine. It’s about how long these unusually strong profits can last and what that means for the rest of the chip space.
“Memory today is in very tight supply, and supply can’t be brought up that easily, and you see that in our results,” Micron CEO Sanjay Mehrotra told CNBC’s “Money Movers” on Thursday. he said. “You see the value of memory reflected in our strong financial performance in the second quarter.”
On a call with analysts Wednesday, Mehrotra and his team said major customers were getting only half to two-thirds of the memory they wanted. They also highlighted the company’s first five-year strategic customer agreement; This is a big change from the one-year deals the industry is used to.
Micron expects free cash flow to rise above two quarters a quarter despite the increase in capital spending.
And it’s not just Micron talking this way.
SAMSUNGLeaders are currently discussing a three to five year period memory contracts As demand for AI absorbs supply. Chey Tae-won, president SK Hynix‘s parent company SK Group went further, saying: global memory chip shortage It may extend towards the end of the decade.
Putting this all together, the three biggest memory players say this is not a one-time problem. A multi-year period in which supply has difficulty meeting demand.
And analysts are banking on this story.
Daiva He more than doubled his price target on Micron from $350 to $700, and Cantor Fitzgerald also raised its target to $700 with the view that this memory upgrade cycle will not peak in 2026 and could last until 2027 or 2028.
Others point to the initial five-year strategic customer agreement as evidence that customers do not expect this shortage to be resolved quickly and are willing to keep supply and pricing steady.
At the same time, Micron is increasing its spending plans for this fiscal year to at least $25 billion, signaling a meaningful increase again in 2027.
Samsung raises spending expectations chip production It rose to 73 billion dollars.
This is exactly the kind of spending ramp that makes some investors nervous. The old memory playbook recommends starting to fade the group when the big new factories and cleanrooms come crashing down, because that’s when future supply starts to catch up.
So, while key players in memory production talk about tight supply in 2026 and beyond, some segments of the market are asking whether we are already close to peak congestion and peak margins, and whether the size of future “pulses” will naturally taper off from here.
