Micron Technology Has Fantastic News for Memory Stock Investors

The memory trade on Wall Street has been cracking lately, as investors have been booking profits and rotating out of memory stocks following a phenomenal surge in this sector over the past couple of years.

The Roundhill Memory ETF , an exchange-traded fund that invests in major memory companies across the globe, has lost 27% of its value over the past couple of months. However, the recent downturn in memory stocks may not last long, as artificial intelligence (AI) has become a durable growth driver for the industry.

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This is what Micron Technology (NASDAQ: MU) CEO Sanjay Mehrotra recently told CNBC in an interview. Let's take a closer look at Mehrotra's comments and check why they point toward better times for the memory industry in the long run.

The memory industry is out of its boom-and-bust cycle

The memory business has been cyclical in the past. The industry's demand and supply dynamics have historically been dictated by sales of smartphones and personal computers (PCs). So, whenever demand for these consumer devices weakened, the industry faced oversupply.

AI, however, has changed that. Mehrotra told CNBC that AI infrastructure won't work without memory. That's not surprising, as memory doesn't just help AI data centers store massive amounts of data, but also to transfer enormous data sets rapidly to accelerator chips, such as custom AI processors and graphics cards, so that they can perform complex calculations quickly.

The mission-critical nature of memory chips in AI infrastructure has changed the industry's dynamic. The Micron CEO notes that its customers are buying everything that the company can manufacture. Specifically, memory demand from data center customers exceeds supply by 50%. At the same time, Micron sees strong memory demand emerging from other applications, such as autonomous vehicles, edge AI devices, and robots.

Additionally, the smartphone and PC markets are currently struggling due to high memory prices stemming from a supply shortage. All this suggests a structural change in the memory market. The importance of the dynamic random-access memory (DRAM) and NAND flash chips that Micron sells in multiple industries has brought the memory industry out of its boom-and-bust cycles.