As demand for memory chips used in artificial intelligence (AI) data centers skyrockets, Micron Technology, a U.S. memory semiconductor giant, has outperformed both Nvidia and Meta in profitability among major American tech firms.
On Wednesday, Micron reported a record-breaking gross margin of 84.9% for its third quarter, a substantial leap from 74.9% in the previous quarter and 39% a year ago. This marks the highest level in the company’s history.
Wall Street investors are closely watching Micron’s industry-leading profitability among top U.S. tech companies, according to reports from CNBC and Yahoo Finance.
For comparison, Meta posted a gross margin of 81.9% in its most recent quarter, while AI chip market leader Nvidia achieved 75%. Broadcom reported 69.5%, Microsoft 67.6%, and Alphabet 62.4%.
During the earnings call, Micron’s Chief Financial Officer Mark Murphy highlighted that the third-quarter gross margin more than doubled year-over-year, setting an all-time company record.
Long viewed as a commodity memory manufacturer vulnerable to economic cycles, Micron’s fortunes have dramatically shifted in the AI era.
The fierce competition among AI giants like Nvidia, AMD, and Google for high-bandwidth memory (HBM) has transformed memory into a critical bottleneck in AI infrastructure development. The resulting supply shortage has driven prices skyward, significantly boosting Micron’s pricing power.
Even consumer electronics behemoths like Apple are feeling the pinch of rising memory costs. In a recent Wall Street Journal interview, Apple Chief Executive Officer (CEO) Tim Cook acknowledged that the memory price surge is unsustainable, hinting at potential price hikes for some products.
Micron expects this boom to have staying power. The company is expanding its strategic customer agreements (SCAs) with key clients, locking in volume and pricing for multiple years.
Micron CEO Sanjay Mehrotra stated that these contracts, with established price floors, enable us to secure higher profitability than any previous memory boom. It anticipates the memory market’s supply shortage, driven by AI demand and structural supply constraints, to persist beyond 2027.
This stellar performance bodes well for the South Korean semiconductor industry. SK Hynix, a frontrunner in AI-focused HBM, is also poised to reap significant benefits from the AI memory supply crunch.
While recent concerns about slowing AI memory demand triggered a sharp correction in SK Hynix’s stock price on the Korean market, Micron’s results reaffirm the robust nature of memory demand.
Optimism is growing that global memory leaders Micron, SK Hynix, and Samsung Electronics will continue to enjoy structural benefits from increased AI data center investments.
Mehdi Hosseini, an analyst at U.S. investment bank Susquehanna, told CNBC that for three decades, the memory industry was undervalued. Now, it’s a market where customers must pay a premium. In the AI era, memory has become a strategic asset.