Artificial intelligence has shattered the 40-year memory market cycle: Micron's gross margin has soared to 85%
The semiconductor memory market is undergoing a tectonic shift. The long-standing cyclical pattern that dictated the rules of the game for chip manufacturers for about four decades has been broken. The key catalyst for this turning point is artificial intelligence, which has transformed one of the most "commodity-like" and volatile segments of the technology sector into a hyper-profitable business.
Micron Technology's financial results are a clear confirmation of this transformation. The company's gross margin reached a phenomenal 85%, compared to 39% just a year earlier. This is not just growth—it is a paradigm shift. Micron's revenue quadrupled year-over-year to $41 billion, and net profit surged from $1.9 billion to $28 billion.
For decades, the memory market followed a predictable scenario: rising prices spurred the construction of new factories, overproduction drove margins down to nearly zero, and the cycle repeated. Memory was a classic commodity sold by the ton, with profitability swinging like a pendulum.
Now, that pendulum has stopped. Micron's management stated that the market deficit will persist at least until 2028. The company has already locked in half of its future revenue through long-term contracts—something never seen before in the history of the "commodity" memory business. This is the prerogative of companies with a unique position in the supply chain, not suppliers of standardized components.
Why has the value of memory changed?
The reason is not a change in the product itself. Memory chips remain physical devices as they always were. What has changed is the context of demand. Artificial intelligence has created a colossal shortage of computing power, which cannot function without memory. It is this shortage, not product innovation, that has turned the market upside down.
AI has reached the most undervalued business in technology—memory manufacturing—and turned it into one of the most profitable "hardware" sectors on the planet. The cycle has not just reversed; it has been broken.
Expert opinion: Traditional cyclical models in the semiconductor industry are becoming a thing of the past. AI creates structural, not cyclical, demand for memory. This means we are not witnessing another peak in the cycle, but a new reality where high margins become the norm for key players. For investors in the semiconductor sector, this is a signal to reassess their fundamental valuations and long-term expectations.