Artificial intelligence has disrupted the 40-year memory market cycle: Micron's gross margin has reached 85%
The semiconductor memory market is undergoing a tectonic shift. The long-standing cyclical pattern that defined the dynamics of this sector for nearly four decades has been broken. The key catalyst is artificial intelligence, which has fundamentally changed the structure of demand and pricing for memory chips.
Micron Technology's financial results are the clearest confirmation of this transformation. The company's annual revenue quadrupled, reaching $41 billion. Net profit soared from $1.9 billion to a staggering $28 billion. However, the most telling indicator is the gross margin, which jumped from 39% to 85% over the same period. This is a level of profitability previously the exclusive prerogative of software developers, not manufacturers of physical hardware.
A Broken Mechanism
Historically, the memory market was a classic example of a cyclical commodity business. Rising prices spurred the construction of new factories, leading to oversupply, price crashes, and margins turning negative. This cycle repeated with predictable regularity every few years. Now, this mechanism has failed. Micron's CEO stated that the market deficit will persist at least until 2028. Moreover, the company has already locked in half of its future revenue through long-term contracts — an unprecedented situation for a market that has always traded on a spot basis.
The key factor is explosive demand from AI infrastructure. The computing power required for training and inference of large language models demands colossal volumes of high-speed memory. Supply simply cannot keep up with this demand. It is the deficit, not a change in the product itself, that has turned the market upside down. Memory as a physical object has not changed — its value in the new technological paradigm has changed.
AI has not only created new winners in software and chips — it has reached the most undervalued and seemingly unattractive business in technology and turned it into the most profitable hardware on the planet. The cycle has not reversed — it has broken.
Expert opinion: This is a historical precedent. We are witnessing not just another upswing in the cycle, but a structural change. Memory has ceased to be a commodity and has become a strategic resource for the AI era. Investors should reconsider their valuation models for the entire semiconductor sector. Companies capable of supplying HBM (High Bandwidth Memory) will gain a long-term competitive advantage comparable to owning exclusive software.