Key Points
In the first wave of the artificial intelligence (AI) boom, everyone was talking about Nvidia, the world’s biggest AI chip designer, and cloud companies such as Amazon and Microsoft. And those companies continue to be key AI players.
But in recent times, investors have recognized a new group of AI companies, and they have been leading the pack when it comes to stock performance. I’m talking about memory and storage companies, and one of the leaders is Micron Technology (NASDAQ: MU).
Micron has seen its stock skyrocket over the past few years thanks to the crucial role it plays in the AI story. If you’d invested $10,000 in Micron around the time of its initial public offering, how much would you have now? Let’s find out.
Earnings explode higher
First, it’s important to note that Micron didn’t launch its IPO just a few years ago. The company has been around for almost 50 years, and it completed its IPO in 1984. Micron specializes in the memory and storage needed in devices from personal computers and servers to smartphones. Over the years, the company progressively grew earnings, but they just recently exploded higher — and that has been thanks to AI demand.
MU Revenue (Annual) data by YCharts
Customers have rushed to Micron and peers for the memory needs of AI workloads, and demand has been so high that it’s led to tight supply. In fact, Micron predicts this difficult supply situation will continue past the 2027 calendar year.
Not only is demand high, but ramping up production of memory chips isn’t something that happens overnight. The need for skilled workers, permitting requirements, and other factors have contributed to the memory shortage — and this concerns all memory chip companies, not just Micron.
All of this has kept earnings marching higher, and the stock price has followed as investors took notice of Micron’s tremendous growth.
Now, let’s consider the value of your investment if you’d bought $10,000 in Micron shares on IPO day. Today, your investment would be worth more than $8 million — so Micron has been a millionaire-maker stock.
MU data by YCharts
Favor long-term investing
It’s important to note, however, that such a big investment in one stock is risky — you should always favor investing broadly across many stocks and holding on over time. But this example does show the value of holding onto a stock over the long term. If you had sold Micron shares after only a couple of years, you might have sold at a loss. By holding on to the stock for at least a decade, though, you clearly won. If you bought on IPO day and sold 10 years later, your investment would have been worth more than $46,000. That may seem like nothing compared to today’s multi-million-dollar return, but it still is a significant gain.
MU data by YCharts
Of course, you can’t count on every stock to deliver such returns, even over many decades. But if you choose quality stocks and hold on for at least 10 years, you’re likely to set yourself up for success.
Now, you might be wondering about Micron’s performance in the years to come. Is the growth over, or does this stock have more room to run? It’s unlikely Micron will replicate the immense gain we’ve seen in recent years, but that doesn’t mean the stock’s potential is over. Micron’s business is going strong, and the combination of the memory chip shortage along with the major needs of AI players should power earnings growth in the quarters to come.
Chips generally have been a cyclical business, with demand soaring at a particular point, then falling as supply exceeds the needs of the times. This results in the stocks climbing, then going on to stagnate or stumble. Considering the strength of the AI story so far, though, it’s possible that Micron and peers may see cycles that are less extreme — it’s too early to say for sure.
But it’s very possible that this stock that’s made millionaires, even if it takes a pause at a certain moment, will continue to advance over the long run.
Should you buy stock in Micron Technology right now?
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Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
