On Thursday, the memory chipmaker reported an eye-popping 346% surge in quarterly revenue. As if that wasn’t enough, it reported a profit of $28.2 billion for the quarter, almost 15 times higher than the same quarter last year. By all accounts, the company blew past analyst expectations, sending its stock soaring almost 16% in after-hours trading. The rally continued into Thursday evening, with Micron’s shares closing up 15% at $1,213 per share.

Micron’s stellar results have helped stabilize markets after a bruising selloff in AI and tech-related stocks earlier this week by pushing up futures for both the tech-heavy NASDAQ and the broader S&P 500 indexes. It has also given Wall Street hope that the AI trade still has some steam.

“This shows the memory and chip trade is well-intact and still in the early stages of playing out with the AI Revolution still in the third inning,” wrote tech bull and Wedbush analyst Dan Ives in a Wednesday note. 

Today, Micron boasts a $1.3 trillion market cap and is one of the three biggest computer memory manufacturers in the world, with Samsung and SK Hynix, and the only major one based in the U.S. But far from a perennial sure-bet, Micron comes from humble roots and took the long way to success.

And that’s evident in the business model. While Micron’s business is anything but flashy, it makes something just as essential: the memory chips that store and move data at blistering speeds inside AI servers. 

High bandwidth memory chips like those made by Micron help AI processors function by stacking multiple layers of memory directly on top of each other and connecting them with microscopic wiring that allows data to flow at extremely high speeds.

Because training a large language model requires moving billions of data points per second between processors and memory, the chips Micron makes need to be fast enough to keep up.

Micron’s story

The company, which today has more than 50,000 employees, was founded in 1978 in the basement of a Boise, Idaho dental office with four original founders: twin brothers Ward and Joe Parkinson were two of them. Joe was a lawyer in Boise, Idaho, while Ward, after earning a master’s degree in computer design from Stanford, worked at the Dallas-based Mostek Corporation, which at the time was one of the dominant players in dynamic random-access memory, or DRAM. 

After he left the company, Ward teamed up with two of his colleagues from Mostek, Dennis Wilson and Doug Pitman, to create Micron. When they returned to Idaho at the request of Pitman, Joe helped them draft incorporation papers for the new company. The foursome found a good deal on a space beneath a dentist office, where “We got used to smelling happy gas,” Joe Parkinson told the Idaho Statesman, and the company was born.

Their early funding of $300,000 came from a handful of local businessmen persuaded over lunch at a downtown restaurant, and later from J.R. Simplot, a potato baron from Idaho, according to the outlet. 

The fledgling company’s first contract was for Mostek, the very company three of the four cofounders had left. Mostek wanted Micron to help it design a 64K memory chip, which at the time was cutting edge technology—but today would hold only enough memory for a single short email. 

Micron took on the challenge and improved on the existing design of the 64K DRAM chip to make it the smallest in the world, setting Micron on a course to mass produce its own improved 64K chips starting in 1981, and arguably its first step to success.

Today, Micron has manufacturing facilities across five countries, including Taiwan and Japan, in addition to the U.S., and is rapidly expanding its manufacturing capabilities domestically thanks to funding from the 2022 CHIPS Act, which provided billions of dollars in funding to bolster the U.S. chipmaking industry. Yet, in 1980, the company had only one manufacturing facility on desert land southeast of Boise, Idaho, owned by one of the company’s early investors, according to the Idaho Statesman. 

It was this manufacturing facility, which still stands today, that helped Micron mass produce its 64K memory chip product that was then used in many early computers including the Commodore 64 home computer. 

As the company grew, it began producing improved chips with more memory, from 64K, to 256K and finally their 1-megabit memory chip, which had about 16 times more memory than the company’s original 64K chip. By 1998, the company purchased Texas Instruments’ worldwide memory operations, making it one of the biggest memory producers in the world.

Surviving fierce competition

But Micron’s rise was never linear. Through the 1980s and 1990s, the company faced an existential threat from Japanese chipmakers backed by government subsidies who flooded the market with cheap memory chips, slashing prices below the cost of production. While smaller American rivals like Intel and Advanced Micro Devices were forced to exit the memory chip market because of competition, Micron survived partly through aggressive cost-cutting, and partly through anti-dumping lawsuits and their efforts to convince U.S. government officials that Japanese rivals were violating international trade rules with their low cost chips. This pressure eventually helped bring about the landmark 1986 U.S.-Japan Semiconductor Agreement, which set minimum price floors for Japanese memory chips sold in the U.S.

But, partly because of competition, for years, memory chips were a commodity business with prices that swung wildly. Some years brought large profits while other years nearly brought the company to an end as the market produced more memory chips than clients needed.

Micron went public on the NASDAQ in 1984 at $13 per share, far below today’s price of more than $1,200 per share. For decades, Micron’s boom-and-bust business made Wall Street view the company as a short-term trade rather than a long-term investment.

Though, as the global memory market consolidated into the hands of three companies, Micron, Samsung, and SK Hynix, Micron’s business became much more reliable. These three companies now control about 95% of global DRAM production.

The rise of artificial intelligence has now taken the company’s memory business to a new level.  Micron’s newfound dominance is partly due to a new category of memory chip that Micron has capitalized on. High-bandwidth memory, or HBM, is a specialized product that stacks memory chips on top of each other to move data at extraordinary speeds—exactly what AI processors need to function. 

The company’s HBM4 chip, its most advanced product released in March, is designed specifically for Nvidia’s Vera Rubin platform, which helps power major AI systems like ChatGPT.

Yet, only a handful of companies have the capacity to mass produce these top-end products. Unlike traditional DRAM chips, HBM chips are extraordinarily complex to manufacture and there is a shortage of supply worldwide.

Analysts at investment bank William Blair said it’s this dynamic that assures Micron will be an essential company in the AI race for years to come.

“Micron remains one of the key beneficiaries of the AI supercycle, which is consuming a growing share of the global memory capacity and driving record-high prices and profits for vendors,” the analysts wrote in a Wednesday note.