Micron CEO Sanjay Mehrotra told Jim Cramer on Thursday's "Mad Money" that AI-driven memory demand will keep outrunning supply for years, even as the stock trades at less than 7 times forward earnings. He pointed to a growing roster of multiyear customer contracts and pledged larger shareholder returns once a CHIPS Act buyback restriction lifts in December.
Mehrotra's appearance addressed the market's biggest worry about Micron: whether the current memory boom will end the way past cycles have, in a supply glut and a price crash. The industry has seen soaring profits despite a recent pullback. Yet Micron still trades at less than 7 times forward earnings, a sign investors still expect the cycle to turn.
Demand is spreading beyond data centers
Mehrotra argued the AI buildout is no longer the only source of memory demand. According to CNBC: "Memory is the intelligence behind artificial intelligence." Phones, PCs, self-driving cars and future robotics are all adding memory content as they take on more AI processing at the edge, he said, and agentic AI systems with larger context windows are pulling in still more.
On the supply side, Mehrotra said 2027 will be even tighter than 2026. Micron's new Boise, Idaho fab won't produce its first wafers until 2027, with production ramping in 2028. A plant in Clay, New York won't ramp until 2029 to 2030. The company plans to invest $250 billion in the U.S. through 2035, including up to $6.2 billion in CHIPS Act funding.
Customers are locking in supply for years
Micron has signed strategic customer agreements, or SCAs, that commit buyers to take memory at agreed terms years in advance. As of its fiscal third-quarter report in June, the company had inked SCAs with 16 customers, including four very large customers and three medium-sized ones — up from just one SCA at the time of its March earnings call. Mehrotra told Cramer the company has signed more agreements since June, though he didn't give a specific number.
A buyback ban is set to expire
Micron generated $25 billion in operating cash flow last quarter. Free cash flow was about $17.5 billion in its fiscal third quarter. It is expected to be about $50 billion in fiscal 2026. However, a two-year ban on large-scale buybacks tied to its CHIPS Act funding is set to expire in early December. Mehrotra committed to returning more cash to shareholders once the company has funded its growth plans.
Source: CNBC
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