Micron’s AI Memory Engine Roars Ahead With Record Sales and New DDR5, but $25 Billion Capex Plan Gives Investors Pause

Micron posts record revenue up 196% and massive guidance, but $25B capital spending plan spooks investors; stock drops 7.7% despite AI memory boom.

Micron Technology is firing on all cylinders operationally, yet its stock has cooled sharply after a blistering rally. The disconnect stems not from weak results — the numbers are historic — but from the staggering cost of keeping the AI-fueled growth engine running. At the center of the debate: a $25 billion capital expenditure plan that has some investors questioning whether today’s fat margins are sustainable.

The Boise-based memory chip maker delivered a blockbuster fiscal second quarter. Revenue surged 196% to $23.86 billion, comfortably above the $20.07 billion analysts had penciled in. Non-GAAP earnings per share hit $12.20, handily beating the $9.19 consensus. Gross margin expanded to 74.9%. The outlook for the current quarter was even more jaw-dropping: Micron guided for revenue of roughly $33.5 billion, gross margin of about 81%, and EPS of $19.15. Wall Street had been expecting revenue of only $24.29 billion.

That kind of momentum is being driven by red-hot demand for AI-related memory. Micron is now sampling 256GB DDR5 RDIMM modules that operate at up to 9,200 megatransfers per second — more than 40% faster than current production modules. For operators of massive AI data centers, that speed advantage translates directly into lower power consumption per compute cycle. The company is also shipping its new 245TB SSD 6600 ION, designed to pack more storage into less space while cutting energy use. High Bandwidth Memory remains so tight that management has declared HBM capacity sold out through the end of the fiscal year — and the addressable market is projected to balloon from $35 billion in 2025 to more than $100 billion.

Yet shares have been under pressure. After a 132% year-to-date run, the stock closed Friday at €624 in euro-denominated trading, down 7.69% on the week and nearly 7% below its 52-week high set in early May. The culprit: the sheer scale of Micron’s investment ambitions. For the current fiscal year, the company plans to spend $25 billion on capital projects, with roughly $7 billion flowing in the third quarter alone. For fiscal 2027, it has signaled that building-related outlays will rise by more than $10 billion from the prior year.

Investors are wrestling with a classic cyclical dilemma: will a wave of new supply eventually crush pricing before the company can recoup its outlays? The forward price-to-earnings ratio of 7.7 — low for a business growing at this clip — suggests the market is already pricing in a correction. The China factor adds another layer. Micron is winding down its data center operations in the country, which accounted for roughly 12% of annual revenue, after a 2023 ban on its chips for critical infrastructure. The company notes that recent growth has come almost entirely from AI infrastructure outside China, so the retreat mainly clarifies a revenue stream that was already drying up.

A separate wild card is looming across the Pacific. Samsung, Micron’s main rival in memory chips, faces a potential strike starting May 21. More than 45,000 workers have threatened an 18-day walkout. Any disruption at Samsung would tighten an already strained DRAM and HBM supply market, potentially giving Micron’s near-term pricing power a boost.

Adding to the noise, CEO Sanjay Mehrotra recently sold shares worth about $52.4 million through a pre-arranged 10b5-1 trading plan. While such plans are designed to blunt the signaling impact, insider sales at this magnitude rarely go unnoticed. The stock’s trading liquidity has been enormous — over $598 billion in shares changed hands in the past 30 days, with daily volume of $34.8 billion, rivaling Nvidia’s.

Analysts remain broadly bullish. Bank of America recently raised its price target to $950 from $500, maintaining a buy rating and pointing to the earnings power in the AI memory segment. On Wednesday, Micron executives are scheduled to appear at the J.P. Morgan Global Technology, Media and Communications Conference in Boston. How management frames the Capex trajectory — and whether it can convince the market that the investment cycle will be rewarded — may well determine the stock’s direction through the end of the current quarter in late May.