Artificial intelligence is inspiring companies to make massive investments of capital. Much of that money is slated to go to the businesses that produce essential components for hardware to run AI-powered applications and harness the data necessary to produce the most valuable insights. For companies that specialize in producing those components, every news item boasting of another multi-billion dollar investment in AI is a reason to celebrate.
Micron Technology (NASDAQ: MU) has put itself in exactly that position as an essential supplier of memory chips for AI hardware, and yesterday, the first article in this series on Micron for the Voyager Portfolio looked at the company’s inspiring history and rise to the pinnacle of the tech industry. Today, you’ll learn more about Micron’s financial results and why the best of times might still be well into the future.
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One thing investors can learn a lot from with Micron’s financial results is that when you start a comparison makes a huge difference. Both of the following narratives are completely true, but they paint very different pictures of Micron’s growth:
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Over the past 12 months, Micron’s revenue has been nearly triple what it was during the company’s 2023 fiscal year. The semiconductor memory chipmaker has gone from a huge loss of $5.8 billion three years ago to net income of $11.9 billion over the past four quarters. Margins have enjoyed explosive growth.
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Micron sales are up just under 40% since the chipmaker’s strong year in fiscal 2022. Operating and profit margins have only recently returned to their same levels from four years ago, and the 37% rise in net income, although solid, seems out of proportion with the stock’s much larger gains over the same period.
The way to reconcile those two views is to understand that historically, Micron’s memory chip business has followed the ups and downs of the technology business cycle. At certain times, Micron’s chips are in huge demand, and the high prices it’s able to command for the chips it’s able to produce lead Micron to make investments to boost capacity. Inevitably, though, that spike in demand has been followed by a softening of the market for Micron’s components. At that point — just as we saw during the bear market in calendar 2022 — sales can take a huge hit. It’s therefore crucial to be sure that in comparing Micron’s recent results with older numbers, you measure from peak to peak or trough to trough. At the very least, avoiding mismatched comparisons avoids embarrassing miscalculations about what the future is likely to bring.
