The $1 trillion club used to be exclusive. Now, it’s getting too crowded. As of the time of writing, 13 companies worldwide have broken the $1 trillion market value threshold.
However, there is one at the door of admission: Micron technology (NASDAQ: MU). It’s about a $900 billion company right now, so it only needs a move of more than 10% to join the $1 trillion club. However, Micron’s stock has been so hot for the past few weeks that this move is likely in a few 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 thrives on memory scarcity
Micron makes memory chips, which have been in short supply lately. Memory is an essential part of any computer, whether it’s your PC, smartphone, or artificial intelligence (AI) data center. AI has become a huge consumer of memory, and it has reached the point where there is a global shortage of memory chips.
There isn’t a ton that separates one memory chip manufacturer from another, so the market is fairly marketed. As a result, when demand is high and supply is low, the price goes up. That’s exactly what we’re seeing right now with every memory chip manufacturer, and each one has sky-high memory prices.
Micron is one of the largest memory manufacturers and is seeing its profits rise rapidly. Two months ago, 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 did. Additionally, its margins on its products increase because it can charge higher prices.
The future is bright for Micron as well. During its latest conference call, executives noted that it only has enough capacity to meet half to two-thirds of total memory demand. Combine that with the fact that the memory chip market for data centers is expected to grow from $35 billion in 2025 to $100 billion in 2028, and it looks like this shortage will be around for a while. Micron and its peers are working to get more production up and running, but it may be a few years before they have more manufacturing facilities open to meet demand.
This makes it clear that Micron’s run is beginning. Even though it’s a nearly $1 billion company now, don’t be surprised if it continues its upward march due to high demand.
Should you buy stock in Micron Technology right now?
Before buying stock in Micron Technology, consider the following:
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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Micron Technology. The Motley Fool has a policy of disclosure.
Prediction: This Will Be the Next $1 Trillion Company was originally published by The Motley Fool
