The billion dollar club used to be quite exclusive. Now it’s getting much busier. At the time of writing, 13 companies worldwide have surpassed the $1 trillion market value threshold.
However, there is one right on the verge of being admitted: Micron technology (NASDAQ:MU). It’s a $900 billion company right now, so it only needs a little more than a 10% move to join the trillion-dollar club. However, Micron stock has been so hot in recent weeks that this move could happen within days.
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Micron has been an incredible investment story, but is it still worth buying after its incredible rally? Let’s take a look.
Micron is thriving on memory shortages
Micron makes memory chips, which have been in short supply lately. Memory is an important part of any computer, whether it’s your PC, smartphone, or an artificial intelligence (AI) data center. AI has been a huge consumer of memory and has reached the point where there is a global shortage of memory chips.
There isn’t much that separates one memory chip manufacturer from another, so the market is quite commoditized. As a result, when demand is high and supply is low, the price rises. That’s exactly what we’re seeing now with all the memory chip manufacturers, and each of them is discounting sky-high memory prices.
Micron is one of the largest memory manufacturers and its revenue is increasing rapidly. Two quarters ago, its revenue was $13.6 billion. Last quarter, it was $23.9 billion. Next quarter, management expects $33.5 billion. Adding $10 billion per quarter when the base was around $10 billion is no easy feat, but that’s what Micron is doing. Additionally, the margins on its products are increasing because it can charge a higher price.
The future is also bright for Micron. During its latest conference call, management noted that it only has enough capacity to meet between half and two-thirds of total memory demand. Combine that with the fact that the data center memory chip market is expected to expand from $35 billion in 2025 to $100 billion in 2028, and it looks like this shortage will last a while. Micron and its peers are working to bring more production online, but it may be a few years before they can open more manufacturing facilities to meet demand.