Micron's $1 Trillion Market Cap Can't Shake Off Memories of Past Downturns

Shares of Micron Technology (MU) have skyrocketed over the past year due to memory shortages, resulting in explosive growth in revenue and profits. The stock has surged by more than 700%, with its market cap crossing $1 trillion, yet it still trades at a relatively low valuation of about 7 times next year's consensus earnings estimate.

This multiple is significantly lower compared to Nvidia's roughly 18 forward price-to-earnings (P/E) multiple. Investors are cautious despite booming demand due to the memory market's boom-and-bust history, which has led to a 50% revenue drop in some years.

The current memory boom might last for another year or two, but after 2028, the gap between supply and demand is expected to shrink as Micron and its competitors bring expanded manufacturing capacity online. This could lead to lower prices and profit growth.

Management expects new strategic customer agreements to be transformative for the business, with 16 contracts signed so far, each lasting five years. These deals aim to lock in prices and volumes, making future revenue more stable.