Micron Technology (NASDAQ: MU) has been one of the market's hottest stocks over the past year, up nearly 600% through the last week of September. However, this may be a case of an artificial intelligence (AI) stock getting too far ahead of itself in a short period of time. As of this writing, you can buy one share of the company for around $1,080.

Micron is one of the big three memory makers along with its Korean counterparts SK Hynix (NASDAQ: SKHY) and Samsung. It gets about 75% of its revenue from DRAM (dynamic random access memory) and 25% from NAND. Prices for both types of memory have been skyrocketing, which is causing Micron's revenue and gross margins to soar.

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Riding the memory supercycle

Historically, memory goes through large boom-and-bust cycles, where strong demand drives prices up, only to be followed by increased capacity that causes prices to collapse. The current memory cycles, however, seem a little different.

Both DRAM and NAND prices are currently being driven by strong demand from AI data centers and by the big three memory makers putting most of their efforts toward high-margin, high-bandwidth memory (HBM). HBM is a special form of DRAM that gets packaged with graphics processing units (GPUs) and other chips to reduce latency and improve performance.

Demand is through the roof and has become one of the biggest bottlenecks in AI, with the major AI semiconductor companies scrambling to lock in longer-term deals to secure future supply. Meanwhile, NAND is also in high demand as frontier model companies need enormous numbers of solid-state drives (SSDs) with flash memory to store their massive amounts of AI training data.

HBM supply is currently constrained because it is competing for the same extreme ultraviolet lithography (EUV) machines that advanced chips like GPUs need in their manufacturing process. At the same time, HBM requires around three times the wafer capacity as ordinary DRAM. With the big-three memory makers throwing most of their resources at increasing HBM capacity, this has ironically led to conventional DRAM and NAND prices rising much more than already high-priced HBM prices.

This has benefited Micron, which, among the big three memory makers, derives the least revenue from HBM. As such, its revenue has skyrocketed, and gross margins have expanded much faster than rival SK Hynix, the HBM market leader.