Micron Technology shares rose approximately 1.3% to $990.14 on Friday after Intel's CEO stated memory prices have surged fivefold to sevenfold, with supply constraints expected to persist into next year. The tight memory market has significantly boosted Micron's profitability, with the company reporting an 84.6% GAAP gross margin in its latest quarter and guiding to roughly 86% for the following quarter. However, at its current price, Micron trades 54.71% above its $640 GuruFocus GF Value, suggesting investors are paying a substantial premium for the scarcity-driven boom. Whilst extreme memory prices are generating strong cash flows today, they may also prompt customers to delay spending or seek alternatives, whilst encouraging additional industry capacity.

Intel CEO Lip-Bu Tan warned that memory prices have surged five to seven times, now comprising roughly 75% of the cost for some lower-end phones and laptops. He cautioned the shortage could worsen in 2027. Tan told investors the industry faces one of its most severe supply constraints across logic, silicon wafers, memory, and substrates. Intel is redirecting production toward data-centre CPUs and projects 2026 capital expenditure above $20 billion, with 2027 spending expected to rise significantly higher. Micron Technology echoed the outlook, stating tightness will continue beyond 2027. SK hynix flagged 2027 as potentially the industry's worst supply year. Micron holds $100 billion in take-or-pay contracts and $22 billion in customer deposits, locking in floor pricing above previous peak margins.

Micron Technology could follow Nvidia's lead with a substantial dividend increase, as semiconductor companies adapt to the AI-driven profit boom. Nvidia recently raised its dividend by 2,400%, from $0.01 to $0.25 per share, translating to roughly $25 billion in annual payments. This move comes after years of chip stocks deprioritising dividends in favour of growth investments. Micron currently pays a quarterly dividend of $0.15, yielding just 0.06%. However, the company's net income reached $50.5 billion over the past four quarters, giving it a dividend payout ratio of only 1.1%. This low ratio suggests significant room for increases. The memory chip manufacturer trades at a forward price-to-earnings ratio below 7, based on fiscal 2027 projections. Combined with its strong profitability, this creates conditions favourable for a dividend hike that could boost the stock further.