AI rewrites the rules of the memory market: Micron's gross margin soars to 85%, breaking the 40-year cycle
The semiconductor memory market is undergoing a tectonic shift. What was considered an unshakable law of cyclicality in this business for decades has collapsed under the pressure of artificial intelligence. Micron Technology's quarterly report was not just a financial event, but a manifesto of a new era, where the most standardized product in the industry suddenly began generating margins comparable to software giants.
Numbers that break the mold
Micron's financial results for the last reporting period look like a Hollywood blockbuster script. The company's annual revenue quadrupled, reaching $41 billion. Net profit surged from $1.9 billion to $28 billion. But the most shocking metric is the gross margin. Just a year ago, it was 39%. Today, this figure has soared to 85%.
To understand the scale of the anomaly, we need to recall how the memory market has worked for the last 40 years. It was a classic cyclical business: rising prices spurred the construction of new factories, overproduction crashed prices, and margins went negative. This cycle repeated with frightening regularity, turning memory into one of the worst businesses in the tech sector—a commodity sold by the ton, with profitability falling to near zero every few years.
Why the cycle broke, not reversed
The key point is that memory itself as a product did not change. What changed was the demand for it. Artificial intelligence has created a colossal shortage of computing power, and computing machines cannot function without memory. It is the shortage, not a change in the product itself, that has turned the situation around.
Micron's management stated that the shortage will last at least until 2028. Moreover, the company has already locked in half of its future revenue through mandatory multi-year contracts. Commodities do not get such contracts—bottlenecks in the supply chain do. And memory, thanks to AI, has become exactly that bottleneck.
Cryptalist Analytics
The breaking of a 40-year cycle is not just a corporate success story for Micron. It is a signal for the entire semiconductor market. AI has not only created new winners in software and chips—it has reached the most undervalued business in technology and turned it into the most profitable "hardware" on earth. For investors, this means that old valuation models for memory manufacturing companies no longer work. We are entering an era where the shortage created by AI is rewriting the fundamental rules of the game.