Micron Technology (NASDAQ:MU) experienced a turbulent week, closing Friday at $823.03, down 5.9% on the day and 10.6% for the week. The decline comes even as the memory market remains exceptionally tight, driven by surging AI demand and record-high margins.
During the trading week, Micron shares exhibited extreme volatility, with multiple swings exceeding 8%. The stock fell from $900.20 on July 27 to a weekly low of $739.00 on July 29, before rebounding 18.36% on July 30. Despite the midweek recovery, the stock ended the week lower, reflecting investors' broader concerns about the cyclical nature of the memory industry.
Strong Fundamentals Amid Market Skepticism
Micron's fundamentals remain robust. In the fiscal third quarter, cloud and core data-center divisions accounted for 61.0% of revenue, up from 56.3% in the previous quarter and 52.9% a year earlier. The company's preliminary fourth-quarter guidance points to sequential revenue growth of 20.6%, with a gross margin of approximately 86% and GAAP earnings per share projected at $30.73, a 24.6% increase quarter-over-quarter.
These figures highlight the operating leverage provided by the current AI cycle. However, investors are questioning how long such record-high margins can be sustained. Analyst Kim Seok-hwan noted, "Investors are questioning how long their record-high margins will be sustainable."
Demand Signals from Major Customers
Demand signals from key customers remain strong. Amazon.com (NASDAQ:AMZN) increased its 2026 capital expenditure by 10% to $220 billion, with CEO Andy Jassy attributing the bulk of the increase to memory acquisitions and stating that capacity is expected to be constrained until 2027. Apple (NASDAQ:AAPL) reported significant supply limitations and is considering alternative memory suppliers. Samsung Electronics (KRX:005930) anticipates chip supply constraints persisting until 2028 and plans to allocate about two-thirds of its memory production to long-term agreements. Memory executive Jaejune Kim said, "Almost all customers are requesting multi-year supply contracts."
Valuation Disconnect
Despite these bullish fundamentals, Micron's valuation remains discounted relative to peers. On Friday, Micron traded at a price-to-earnings ratio of 18.6, compared to SanDisk (NASDAQ:SNDK) at 42.2 and Nvidia (NASDAQ:NVDA) at 30.6. This 56% discount to SanDisk reflects the market's concerns about the memory cycle's durability.
The volatility indicates that investors are responding to the overall cycle rather than solely focusing on earnings. July saw a 28.7% decline for Micron, even after recovering 11.4% from Wednesday's close.
Risks and Outlook
Several risks could pressure the stock further, including pricing strain from Chinese rivals, reduced spending by hyperscalers, difficulties with HBM4 rollout, or a rise in interest rates. Markets resume trading on Monday, with July manufacturing figures due at 10:00 a.m. ET and payroll data expected Friday. According to a Reuters survey, 83,000 jobs are expected to be added, with unemployment forecast to hold at 4.3%. Micron's next scheduled investor event is on August 10.
As the market digests these mixed signals, investors remain cautious about Micron's long-term prospects, even as short-term fundamentals appear strong.
