Stop viewing Micron (MU.US) through the lens of consumer-grade cycles! AI is rewriting NAND logic, and enterprise SSDs have taken over pricing power.

Title context: Stop viewing Micron (MU.US) through the lens of consumer-grade cycles! AI is rewriting NAND logic, and enterprise SSDs have taken over pricing power. Text: Analyst firm Eudaemon Research re-examined the NAND business outlook for Micron Technology, Inc. (MU.US) in a latest report. The firm had previously judged that within Micron's business structure, DRAM is more resilient than NAND, and that NAND prices and demand would return to normal relatively quickly. But Micron's latest Q4 fiscal quarter data led it to revise this view: NAND is no longer a homogeneous market, and the supply-demand and pricing logic of consumer-grade NAND and enterprise-grade data center SSDs are clearly diverging. Data center SSDs are reshaping the NAND revenue structure Micron's Q4 fiscal quarter shows that its SSD division's data center revenue was about $10 billion, 10 times the year-ago period, and accounted for about two-thirds of total NAND revenue. In the same period, Micron's total NAND revenue was $14.1 billion, up 42% quarter over quarter, with prices up about 30% quarter over quarter. On a subsequent basis, data center SSDs' share of NAND revenue has further risen to about 70%. Data center SSD revenue in just one quarter has already exceeded Micron's total NAND business revenue for the entire previous year. The report emphasizes that this change is not simply shipment growth, but a shift in Micron's NAND product mix toward high-value data center SSDs. As the business focus shifts from the consumer market to the enterprise market, Micron's dependence on cyclical fluctuations in consumer-grade NAND declines, and the pricing and demand of data center SSDs are becoming more critical profit variables. Enterprise-grade SSDs and consumer-grade NAND are diverging TrendForce's latest forecast shows that the NAND shortage is expected to ease in the second half of 2027, when additional capacity will be released. But the main absorbers of the new capacity are not smartphones and notebooks; consumer electronics still account for about 40% of the NAND market, and their weak demand remains a pressure. However, enterprise-grade SSD demand is expected to grow more than 80% this year. Cloud vendors continue to expand AI inference, and most of the new supply has already been locked up in advance, so enterprise-grade SSD prices are expected to rise significantly in Q4. This means that if about 70% of Micron's NAND revenue comes from a market where prices are expected to rise, the adjustment in consumer-grade NAND can be offset by growth in enterprise-grade SSDs. The report's calculations show that even if non-data-center NAND business revenue falls 30%, Micron's total NAND revenue would fall only about 9%; as long as SSD revenue grows 13%, this shock can be offset. Considering that analysts expect enterprise-grade SSD demand to grow more than 80%, the related downside risk no longer appears prominent. KV cache offloading and HDD replacement constitute demand drivers Micron attributes enterprise-grade SSD demand to two major drivers: KV cache offloading and HDD replacement. HBM and DRAM are costly when storing large amounts of data, but their speed advantages are irreplaceable. As AI context scales expand and inference runs continuously, large amounts of data, especially KV caches, can be shifted to SSDs. JPMorgan analyst Harlan Sur said at Micron's Q4 earnings call that Micron participates in NVIDIA Corporation's (NVDA.US) SCADA initiative, which aims to enable GPUs to directly access storage; he also noted that more and more KV cache workloads are shifting to storage. Micron CEO Sanjay Mehrotra largely agreed, saying that context growth is driving the expansion of the storage hierarchy from HBM to DRAM to SSD. The report says this is directly related to Micron's $10 billion in data center SSD revenue. Micron has already secured design wins in the world's largest-scale data center deployments. Although it is difficult to prove that all orders are related to KV cache offloading or SCADA, the related demand has already been reflected in actual deployments, and Micron's SSD business is growing rapidly. Micron's enterprise-grade SSD share is higher than its NAND supply position This leads to the key question: can Micron capture enough share in this market to enjoy excess returns? In fact, Micron does not need to be the largest NAND producer to win in the enterprise-grade SSD market. Harlan Sur noted on the earnings call that Micron's actual share in enterprise-grade SSDs is far higher than its raw NAND supply share, enabling it to obtain higher value per bit. TrendForce's estimate of the revenue structure for the second quarter of 2026 shows that Micron is not the only manufacturer with a high enterprise-grade proportion. Samsung (SSNLF.US) and SK Hynix (SKHY.US) both have even higher enterprise-grade proportions. Samsung holds a clear lead with 176-layer QLC, PCIe 5.0 products, and the ability to supply both DRAM and NAND to the same server customers. SK Hynix has the Solidigm high-capacity QLC product line, plus its own TLC products. Micron's advantage may lie in the speed of its transition: its Q2 enterprise-grade SSD revenue grew 126.3% quarter over quarter, the fastest among the top five manufacturers; the previous 59% share is already outdated, and it is now above 70%. Signs of improvement on the profit side are obvious, and the valuation logic is slightly adjusted Micron does not separately disclose data center SSD gross margins, so it is impossible to precisely determine the profitability corresponding to the roughly $10 billion in revenue. But Eudaemon Research believes a qualitative judgment can still be made from other indicators: Micron's core data center business revenue grew sharply quarter over quarter, with gross margin reaching 90%; the cloud memory business performed relatively less prominently because pricing gains were offset by a higher HBM product mix. Because the core data center business also includes DRAM, it cannot be directly matched with SSDs, but the firm believes that as Micron tilts toward data center SSDs, its business metrics are improving at extremely high levels, and this trend is already relatively clear. On valuation, the firm had used Micron FY2028 earnings per share of $215 and a 7x P/E ratio to arrive at a fair value of about $1,500. At the time, it assumed NAND would normalize before DRAM. Now, the firm's confidence in that assumption has declined. NAND shipments may still normalize in the future, but as long as Micron can use more NAND for enterprise-grade SSDs, it can offset the revenue shock from NAND supply-demand normalization. Eudaemon Research has not yet adjusted its $215 EPS forecast because Micron has not provided enough data center SSD margin details to precisely raise it by $10 to $20. But the firm says $215 no longer looks as aggressive as it seemed two months ago. It maintains its $1,500 fair value and continues to give Micron a "Buy" rating. Unlike before, the firm is now more confident in the profit side of Micron's NAND business.