AI has shattered the 40-year memory cycle: Micron's gross margin has reached 85% — an all-time record
The semiconductor memory market is undergoing a tectonic shift unlike anything the industry has seen in its history. Artificial intelligence hasn't just accelerated demand—it has completely rewritten the rules of the game, shattering a cycle that had operated like clockwork for four decades. Flagship manufacturer Micron has reported results that were previously unthinkable for a "hardware" business.
The company's gross margin has soared to 85%. For comparison, just a year ago, this figure stood at a modest 39%. Micron's annual revenue has quadrupled, reaching $41 billion, while net profit has surged from $1.9 billion to $28 billion. This is not just growth—it is a transformation of the entire sector's business model.
The End of the "Commodity" Era
For 40 years, the memory market followed a predictable script: rising prices spurred the construction of new factories, oversupply crushed margins, and the cycle repeated. Memory was considered one of the worst businesses in technology—a commodity sold by the ton, with profitability plummeting to near zero every few years.
Now, that mechanism is broken. Micron's CEO stated that the shortage will persist at least until 2028. The company has already locked in half of its future revenue through long-term contracts—something a "commodity" business could never afford. This is the prerogative of companies with a unique position in the supply chain.
Why AI Changed Everything
The key factor is not a change in the product itself, but a colossal shortage. AI computing power cannot function without memory, and there is a catastrophic lack of it for everyone. Artificial intelligence has created winners not only in software and chips—it has reached the most undervalued business in technology and turned it into the most profitable "hardware" on the planet.
Memory hasn't changed. Its value in the eyes of the market has changed. The cycle hasn't reversed—it has been permanently destroyed.
Expert opinion: The memory market has forever changed its nature. We are witnessing a transition from a cyclical commodity business to a structurally deficit-driven one. For investors, this means that previous valuation models for companies like Micron no longer apply. Current multiples may seem high, but they reflect a new reality where an 85% margin is not an anomaly, but a new standard.