According to a recent report from research firm Eudaemon Research, the NAND business outlook for Micron Technology (MU.US) has been re-examined. The firm had previously concluded that within Micron's business structure, DRAM was more resilient than NAND, and that NAND prices and demand would return to normal relatively quickly. However, Micron's latest Q4 fiscal quarter data prompted a revision of that view: NAND is no longer a homogeneous market, and the supply-demand and pricing dynamics of consumer-grade NAND versus enterprise data center SSDs are now clearly diverging.

Data center SSDs are reshaping NAND revenue structure

Micron's Q4 fiscal quarter showed that its SSD division generated approximately $10 billion in data center revenue, ten times the year-ago figure, accounting for about two-thirds of total NAND revenue. During the same period, Micron's total NAND revenue was $14.1 billion, up 42% quarter over quarter, with prices rising about 30% sequentially. On a subsequent basis, data center SSDs have further increased their share of NAND revenue to approximately 70%. Data center SSD revenue from just one quarter already exceeds Micron's entire NAND business revenue from the prior year. The report emphasized that this shift is not merely shipment growth but reflects Micron's NAND product mix tilting toward high-value data center SSDs. As the business focus moves from the consumer market to the enterprise market, Micron's dependence on consumer-grade NAND cyclical fluctuations has declined, and data center SSD pricing and demand are becoming more critical profit variables.

Enterprise SSDs and consumer-grade NAND are diverging

The latest forecast from TrendForce indicates that the NAND shortage is expected to ease in the second half of 2027, when additional capacity will be released. However, the primary absorbers of new capacity will not be smartphones and notebooks; consumer electronics still account for about 40% of the NAND market, and their weak demand remains a pressure point. Nevertheless, enterprise SSD demand is expected to grow by more than 80% this year. Cloud providers continue to expand AI inference, and most of the new supply has already been locked up in advance, so enterprise SSDs are expected to see significant price increases in Q4. This means that if approximately 70% of Micron's NAND revenue comes from a market where prices are expected to rise, the correction in consumer-grade NAND can be offset by enterprise SSD growth. The report's calculations show that even if non-data-center NAND business revenue falls by 30%, Micron's total NAND revenue would decline by only about 9%; as long as SSD revenue grows by 13%, that impact can be offset. Considering that analysts expect enterprise SSD demand to grow by more than 80%, the associated downside risk no longer appears prominent.

KV cache offloading and HDD replacement are demand drivers

Micron attributes enterprise SSD demand to two major drivers: KV cache offloading and HDD replacement. HBM and DRAM are costly when storing large amounts of data, but their speed advantages are irreplaceable. As AI context scales expand and inference runs continuously, large amounts of data, especially KV caches, can be shifted to SSDs. JPMorgan analyst Harlan Sur stated during Micron's Q4 earnings call that Micron is involved in NVIDIA's (NVDA.US) SCADA initiative, which aims to enable GPUs to directly access storage; he also noted that more and more KV cache workloads are shifting to storage. Micron CEO Sanjay Mehrotra largely agreed, saying that context growth is driving the expansion of the memory hierarchy from HBM to DRAM to SSD. The report said this is directly related to Micron's $10 billion in data center SSD revenue. Micron has already secured design wins in the world's largest-scale data center deployments. Although it is difficult to prove that all orders are related to KV cache offloading or SCADA, the related demand has already manifested in actual deployments, and Micron's SSD business is growing rapidly.

Micron's enterprise SSD share exceeds its NAND supply position

This raises a key question: can Micron capture enough share in this market to enjoy excess returns? In fact, Micron does not need to become the largest NAND producer to win in the enterprise SSD market. Harlan Sur noted during the earnings call that Micron's actual share in enterprise SSDs is far higher than its raw NAND supply share, enabling it to capture higher value per bit. TrendForce's revenue mix estimates for the second quarter of 2026 show that Micron is not the only manufacturer with a high enterprise mix. Samsung (SSNLF.US) and SK Hynix (SKHY.US) both have higher enterprise proportions. Samsung holds a clear lead with its 176-layer QLC and PCIe 5.0 products, as well as its ability to supply both DRAM and NAND to the same server customers. SK Hynix has the Solidigm high-capacity QLC product line, combined with its own TLC products. Micron's advantage may lie in the speed of its transformation: its Q2 enterprise SSD revenue grew 126.3% quarter over quarter, the fastest among the top five manufacturers; the previously cited 59% share is now outdated, having already exceeded 70%.

Profitability improving noticeably, valuation logic slightly adjusted

Micron does not separately disclose data center SSD gross margins, so it is impossible to precisely determine the profitability corresponding to that approximately $10 billion in revenue. However, Eudaemon Research believes qualitative judgment can still be drawn from other indicators: Micron's core data center business revenue grew sharply quarter over quarter, with gross margins reaching 90%; the cloud memory business performed relatively less prominently because pricing gains were offset by a higher HBM product mix. Since the core data center business also includes DRAM, it cannot be directly mapped to SSDs, but the firm believes that as Micron tilts toward data center SSDs, its business metrics are improving at extremely high levels, and this trend has become fairly clear. On valuation, the firm had previously used Micron FY2028 earnings per share of $215 and a 7x P/E multiple to arrive at a fair value of approximately $1,500. At that time, it assumed NAND would normalize before DRAM. Now, the firm has less confidence in that assumption. NAND shipments may still normalize in the future, but as long as Micron can allocate more NAND to enterprise SSDs, it can offset the revenue impact of NAND supply-demand normalization. Eudaemon Research has not yet adjusted its $215 EPS forecast because Micron has not provided sufficient data center SSD margin details to precisely raise it by $10 to $20. But the firm said $215 no longer looks as aggressive as it seemed two months ago. It maintains its $1,500 fair value and continues to assign Micron a "Buy" rating. Unlike before, the firm is now more confident in the profitability side of Micron's NAND business.