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U.S. stocks finished May with strong gains across the board, led by tech growth stocks and supported by easing oil late in the month, persistent AI optimism, and a “risk-on” bid that pushed major indexes to repeated records.

AI spending remains the dominant market theme. Investors continued leaning in on companies tied to AI compute, infrastructure, and memory. Strong earnings and guidance from Dell highlighted continued demand for AI infrastructure, reinforcing expectations for elevated technology spending throughout 2026. Dell reported another surge in AI server sales, helping lift semiconductor and enterprise technology shares.

Geopolitical risks eased modestly. Markets responded positively to reports that U.S.-Iran ceasefire discussions could be extended, which helped push oil prices lower late in the week and reduced immediate inflation concerns.

Inflation ran hotter than markets wanted.
Inflation rose to 3.3% year-over-year in April (reported in late May), well above the Fed’s 2% target.

Consumers showed real stress.
The University of Michigan consumer sentiment index fell to 44.8 in May, an exceptionally low reading, while inflation expectations moved higher.

The labor market stayed resilient.
April payrolls increased 115,000 with unemployment at 4.3% (released in early May). That kept the “soft landing” narrative alive even as inflation re-accelerated.

In a single quarter this year, Micron $MU ( ▲ 0.79% ) generated $23.9 billion in revenue. Three years ago, that was more than the company made in the entire year. The AI memory boom is real and Micron is right at the center of it. The question is whether that story is already baked into a stock price that has nearly tripled since 2022.

What They Do: Micron $MU ( ▲ 0.79% ) makes the memory chips that power everything: your phone, laptop, and now, AI servers. They are one of only three companies in the world that manufactures DRAM (the fast, temporary memory that AI chips need to run) and NAND (the storage chips that hold your data). That short list of three competitors creates significant pricing power when demand is high which is exactly where we are right now.

Revenue & Momentum — Extraordinary: FY2025 revenue hit $37.4 billion, up 49% year over year. Then in just the first six months of fiscal 2026, Micron $MU ( ▲ 0.79% ) generated another $37.5 billion — matching the entire prior year in half the time. The Q2 FY2026 quarter alone brought in $23.9 billion with a 74.4% gross margin. That is a generational level of profitability driven by AI-related High Bandwidth Memory (HBM) demand.

Free Cash Flow — Distorted, But Improving Fast: FY2025 free cash flow was just $1.67 billion — but that number is misleading. Micron $MU ( ▲ 0.79% ) spent $15.9 billion building new HBM manufacturing facilities. Strip that out and look at the trailing twelve-month FCF of $10.28 billion, which reflects how the business is actually performing today. That is the number that matters for valuation.

Balance Sheet — Strong: Total debt is $15.3 billion, but cash of $10.3 billion brings net debt to just $5.6 billion. Using TTM free cash flow, the debt-to-FCF ratio is 1.43x — solidly in our 'Great' range (anything below 3x). Interest coverage is 20.7x. There is no financial distress story here.

Dividend — Token, But Growing: Micron $MU ( ▲ 0.79% ) yields about 0.05% at current prices — not an income play. But the company just raised its quarterly dividend 30%, from $0.115 to $0.15 per share. The FCF payout ratio on a TTM basis is just 5.1%, meaning the dividend is extremely well-covered and has plenty of room to grow.

Valuation - Using our 5-year DCF model with a 12% discount rate and 25x terminal multiple, intrinsic value comes to $618.67 per share. At $923.52, the stock trades 33% above our fair value range. The market is pricing in a sustained AI boom that keeps profitability at or above the current extraordinary levels.

The memory chip industry is cyclical and the AI boom won’t change that. If anything, this cycle might last longer than others. But it will remain cyclical and supply will eventually exceed demand. This downcycle will present an opportunity to enter a position much closer to the intrinsic value of a stock.

The goal is to enter before a growth cycle, not at the potential peak of the cycle.