Micron Technology

Thesis

Written 2026-08-21. This is a momentum position, and I want that on the record before anything else on the page.

I bought this as a momentum trade on the AI memory cycle, straight after a sharp drop, and I have no view on the business. I have not formed an opinion on its earnings quality, its management or its competitive position, and I am not going to construct one now to make the trade look considered. It was a price and a flow, not a company. I have already trimmed it heavily at a profit, and I intend to exit the rest. It does not fit the long-term shape of the book.

What follows is the analysis I did after the fact, which is the honest order.

The trade works while capital expenditure is rising and demand exceeds supply, and it stops when that reverses. That is the whole mechanism. Memory has run the same loop for three decades: prices boom, manufacturers over-invest, supply floods in, prices collapse. Nothing about AI repeals that; it changes the size and the timing.

The scale of the build-out is the reason I do not want to own this for years. Micron is ramping capital expenditure past $25bn in fiscal 2026 and has outlined roughly $200bn of planned capacity expansion. Samsung and SK Hynix are expanding on a comparable scale. Every dollar of that is capacity arriving later to serve demand priced today, and it is the same dollar that ends the cycle. SK Hynix's M15X fab starts mid-2027; Samsung's P5 is projected for 2028.

There is a second-order risk that is easy to miss. Shortages cause customers to double-order. Backlogs then look like durable demand right up until capacity catches up, at which point they vanish at once. A sold-out order book is evidence of scarcity, not of underlying demand.

The two memory positions I hold are not the same trade. Forecasts have DRAM and NAND diverging in 2027: DRAM staying structurally short into 2028 as HBM absorbs capacity, while NAND turns to sufficiency in the second half of 2027 as new supply arrives against soft consumer demand. That puts a date on one of these positions well before the other.

Micron's gross margin through this cycle

consolidated gross margin, per cent

Scroll the chart sideways →

Show the numbers

Period	Value	Note
FQ3 2025	38%
FQ2 2026	74%
FQ3 2026	85%
Next quarter	86%	guidance

The margin is the clearest read on where we are. Micron's consolidated gross margin went from 38% in fiscal Q3 2025 to 74% and then 85% a year later, with guidance near 86%. SK Hynix is running conventional DRAM operating margins in the high 70s, the best in its history. Memory does not earn those numbers in normal conditions. DRAM pricing is tracking a 275–300% rise from 2025 through 2027, against roughly 90% in the 2017–18 supercycle that is still remembered as extraordinary.

Micron is the better-placed of my two, because DRAM stays tight longer than NAND. Its 2026 HBM output is committed under long-term contracts. That is genuinely a strong position — and it is still a cyclical one, and I am still not the investor to hold it through the turn.

What would make me wrong, and when I sell

I have already cut this position by 60%. The question is not whether to hold it for years — I will not — but what would make me exit the remainder sooner rather than later.

• Capital expenditure guidance rising again across Micron, Samsung and SK Hynix. That is the cycle ending in slow motion, and it is visible long before pricing turns.
• DRAM contract pricing flattening. Prices are the mechanism; everything else is commentary.
• HBM contracts extending on worse terms, which would say the scarcity premium is being competed away.
• Industry profits are not expected to peak before Q4 2027. I do not intend to find out whether that estimate is right by holding through it. Being early out of a cyclical is a cost I am willing to pay.

Latest movements

• 2026-07-30 — Opened at $835.63.
• 2026-08-18 — Trimmed 60% at $935.59, nineteen days after opening. Realized +12.0%.