Micron Technology, Inc. (NASDAQ:MU) took a significant hit of 7% on August 19, dropping to $940.76, amidst a broader semiconductor selloff. Rising bond yields have put the spotlight on highly valued AI stocks, sparking concerns about the sustainability of the current memory cycle.

The Philadelphia Semiconductor Index dropped 5%, with Micron’s decline following an impressive 18% gain over the previous five sessions. Despite this reversal, the company’s shares have more than tripled in 2026. The operating story remains exceptionally strong, with projected cash deposits and related financial commitments under multiyear supply agreements totaling $22 billion, approximately $18 billion of which will be cash deposits.

The Unprecedented Agreements

Micron Technology, Inc. (NASDAQ:MU) has secured 16 strategic customer agreements, each featuring take-or-pay commitments. Most of these agreements come with fixed prices or price bands, while a minority have no price bands. Deposit provisions do not apply uniformly across all agreements, with the largest ones generally including price ceilings to balance upside pricing with greater predictability.

Fiscal third-quarter remaining performance obligations exceeded $5 billion, with the total figure of approximately $100 billion including qualifying agreements signed after quarter-end. This reflects 14 of the 16 agreements at minimum committed volumes and prices.

Bull Case: Contracts Extend the Cycle

The bull case for Micron Technology, Inc. (NASDAQ:MU) revolves around the unprecedented five-year take-or-pay structure, which management described as a game-changer for the industry. This structure can make the upturn more durable by providing visibility, reducing demand uncertainty, and protecting margins. Management expects DRAM and NAND supply to remain tight beyond calendar 2027 as AI demand grows faster than supply.

However, the bear case highlights the potential for capacity and substitution to still pose significant risks. The $100 billion in contracted demand extends across several years and does not eliminate supply, execution, or product-mix risk. Micron forecasts approximately $10 billion of fourth-quarter capital spending, net of anticipated government incentives, which is necessary to meet demand but could be affected by faster industry capacity growth.

Qualcomm has discussed AI chips designed to use cheaper memory, underscoring customers’ incentive to limit premium-memory costs. Higher bond yields add another pressure point for stocks valued on profits expected far into the future.

Insider Monkey’s hedge fund database shows that 154 hedge funds held positions in Micron Technology, Inc. (NASDAQ:MU) at the end of the first quarter, compared with 137 funds at the end of the preceding quarter. These figures reflect holdings as of March 31, 2026, and do not capture trades made after that date or investors’ reactions to the strategic customer agreements or Tuesday’s selloff.

While Micron Technology, Inc. (NASDAQ:MU) has made a stronger case that this memory upturn can last, more durable demand does not erase cycle risk. The decline highlights the stock’s sensitivity to elevated expectations, while weaker AI spending, cheaper substitutes, and faster supply growth remain separate downside risks. Contracted demand strengthens the business case, but after the stock’s extraordinary run, valuation has become the central risk.