Stop Using the Consumer Cycle to Analyze Micron (MU.US)! AI is Redefining NAND Logic, Enterprise SSDs Have Taken Over Pricing Power

According to Odaily News, analysis firm Eudaemon Research has re-examined the outlook for Micron Technology's (MU.US) NAND business in a new report. The firm previously held that DRAM was more resilient than NAND within Micron's business structure, and that NAND prices and demand would return to normal relatively quickly.

However, Micron's latest Q4 fiscal data has prompted a revision to that view: NAND is no longer a commoditized market, and the supply-demand and pricing logic between consumer NAND and enterprise data center SSDs are clearly diverging.

Data Center SSDs Reshape NAND Revenue Structure

Micron's Q4 fiscal results show that revenue from its SSD segment's data center business totaled about $10 billion, ten times the level of the previous year, accounting for roughly two-thirds of total NAND revenue. During the same period, Micron's total NAND revenue reached $14.1 billion, up 42% quarter-on-quarter, with prices rising about 30% quarter-on-quarter. According to subsequent updates, the proportion of data center SSDs in NAND revenue has further increased to around 70%.

In just one quarter, Micron's data center SSD revenue has surpassed its total NAND business revenue for the entire previous year.

The report emphasizes that this shift is not simply due to higher shipment volume, but rather a product mix tilt in Micron’s NAND business towards high-value data center SSDs.

As the business focus shifts from the consumer market to the enterprise market, Micron’s reliance on cyclical swings in consumer NAND is decreasing, and the pricing and demand of data center SSDs are becoming more crucial profitability variables.

Divergence Between Enterprise SSDs and Consumer NAND Trends

The latest forecast from TrendForce shows that NAND shortages are expected to ease in the second half of 2027, with additional capacity coming online. However, the main absorbers of this new capacity will not be smartphones and laptops; consumer electronics still account for about 40% of the NAND market, with sluggish demand continuing to put pressure on the segment.

Nevertheless, demand for enterprise SSDs is expected to grow by more than 80% this year. Cloud vendors are continuously expanding AI inference workloads, and most incremental supply has already been locked in ahead. Enterprise SSD prices are expected to see significant increases in Q4.

This means that if about 70% of Micron’s NAND revenue comes from a market where prices are expected to rise, adjustments in consumer NAND can be offset by the growth in enterprise SSDs. The report’s calculations indicate that even if non-data center NAND revenue declines by 30%, Micron’s total NAND revenue would only drop by about 9%; as long as SSD revenue grows by 13%, this impact could be fully offset. Given that analysts expect enterprise SSD demand to grow by more than 80%, the corresponding downside risk no longer appears significant.

KV Cache Offload and HDD Replacement as Demand Drivers

Micron attributes demand for enterprise SSDs to two main drivers: KV cache offload and hard disk drive (HDD) replacement. While HBM and DRAM remain expensive for storing large amounts of data, their speed advantage is irreplaceable. As AI context size expands and inference runs continuously, significant volumes of data, particularly KV caches, can be shifted to SSDs.

J.P. Morgan analyst Harlan Sur mentioned in Micron’s Q4 earnings call that Micron is involved in Nvidia’s (NVDA.US) SCADA program, which aims to enable GPU direct storage access. He also noted that more KV cache workloads are shifting to storage. Micron CEO Sanjay Mehrotra generally agreed, stating that context growth is driving the extension of memory hierarchy from HBM to DRAM and then to SSDs.

The report states that this is directly tied to Micron’s $10 billion in data center SSD revenue. Micron has received design wins for deployments in the world’s largest data centers. While it’s hard to prove that all orders are tied to KV cache offload or SCADA, the related demand is evident in real deployments, fueling rapid growth in Micron’s SSD business.

Micron’s Enterprise SSD Market Share Exceeds Its NAND Supply Status

This raises a key question: Can Micron capture enough market share in this space to enjoy excess returns?

In reality, Micron does not need to be the largest NAND producer to succeed in the enterprise SSD market. Harlan Sur noted on the call that Micron’s actual share in enterprise SSDs is much higher than its original NAND supply share, allowing it to achieve higher unit bit values.

TrendForce’s revenue structure estimates for Q2 2026 show that Micron is not the only company with a high enterprise proportion. Samsung (SSNLF.US) and SK Hynix (SKHY.US) both have higher enterprise ratios. Samsung leads with its 176-layer QLC, PCIe 5.0 products, and the ability to supply both DRAM and NAND to the same server customer. SK Hynix, along with its Solidigm high-capacity QLC product line, also provides its own TLC products.

Micron’s advantage may be its speed of transformation: Its Q2 enterprise SSD revenue grew 126.3% quarter-on-quarter, the fastest among the top five manufacturers; the prior 59% share is outdated, as it is now over 70%.

Clear Signs of Profitability Improvement, Slight Adjustment in Valuation Logic

Micron has not separately disclosed gross margins for data center SSDs, so it's impossible to precisely determine the profitability for the roughly $10 billion in revenue. However, Eudaemon Research believes qualitative assessments can be drawn from other metrics: Micron’s core data center business revenue grew sharply quarter-over-quarter, with gross margins reaching 90%. The cloud memory business performed less impressively, since price increases there were offset by a higher mix of HBM products. As the core data center business also includes DRAM and does not directly correspond to SSDs, the firm believes that as Micron tilts more towards data center SSDs, its operational indicators are clearly improving at very high levels, and this trend has become increasingly evident.

On the valuation side, the firm previously assigned a fair value of about $1,500 based on Micron’s FY2028 earnings per share estimate of $215 and a 7x P/E multiple. At that time, the assumption was that NAND would normalize before DRAM. Now, confidence in that assumption has decreased. Even if NAND shipment volumes normalize in the future, as long as Micron can allocate more NAND to enterprise SSDs, it can offset the revenue hit from normalization in NAND supply-demand.

Eudaemon Research has not yet adjusted its $215 EPS forecast, as Micron has not provided enough detail on data center SSD profit margins to accurately raise the figure by $10–20. However, the firm notes that $215 is now less aggressive than it seemed two months ago. The $1,500 valuation and “Buy” rating for Micron are maintained. The difference now is that the agency has increased confidence in the profitability of Micron's NAND operations.