Alongside the rest of the market, chip-maker Micron Technology, Inc. (NASDAQ:MU) has been in breakout mode in 2018. Since the start of the year, the S&P 500 has moved 2.5% higher while MU stock is up more than 11%.

That is a pretty big move higher in just over a week. Some investors may be tempted to profit take on this red-hot name.

After all, this has been a largely range-bound stock since early November. MU stock has rallied to $50, dropped to $40, and now bounced back to $45. It was around $44 at the start of November, so Micron hasn’t done all that much over the past two months.

Does that mean it is time to profit take on this rally? Is Micron stock, which has risen by 250% over the past 2 years, maxed out?

Not yet. The music is still playing for this red-hot chip-maker. And the music isn’t going to stop playing anytime soon. Consequently, MU stock should keep grinding higher.

Why MU Stock Has Soared

The reason for Micron stock’s huge out-performance over the past two years is an unprecedented era of favorable supply/demand dynamics in the DRAM and NAND markets.

Demand is burgeoning as fast as it has in recent memory due to a convergence of multiple demand catalysts.

Firstly, smart devices are growing rapidly in popularity. Smartphones started the trend. Now, there are smart lights, smart thermostats, smart cars, smartwatches, smart appliances, smart vacuums, smart speakers… the list goes on and on. Each of these devices stores data, and therefore, memory and storage are big components of the market.

Secondly, the cloud is booming. As data continues to translate into the new currency, companies need a place to store that data. Enter cloud infrastructure services, hosted by tech giants like Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT). These cloud data centers have huge demand for memory and flash storage solutions.

Thirdly, every tech company is obsessed with autonomous driving. While the reality of driver-less cars hitting the roads en masse is likely still multiple years away, that doesn’t mean big tech companies won’t stop testing autonomous driving. There is a lot of innovation happening in the autonomous driving space right now, and Micron is at the front of the charge.

Put all those demand catalysts together, and you get a swelling demand picture. In fact, demand has been so strong that supply has had trouble keeping up. Also keep in mind that autonomous driving vehicles, cloud data centers, and the latest and greatest smart devices all require complex memory and flash storage solutions.

Such complex solutions require more time to build, only further constraining supply. All in all, big demand and constrained supply have led to a surge in profits for Micron.

Why There Is More Upside to MU Stock

The good news is that this favorable supply/demand situation will persist into the foreseeable future. The bad news is that it won’t last forever.

Traditionally, the chip market operates in cycles. When supply is low but demand is high, chip-makers build out capacity to eat market share. It takes about two years for that increased capacity to hit scale, at which point, the market becomes flooded with supply. But demand remains constant. Therefore, prices go down, and profits get eroded.

This will inevitably happen this time around, meaning MU stock isn’t a buy and hold forever. But this bull cycle in the chip market should last for a bit longer, implying that Micron stock should head higher over the next several months and maybe even quarters.

Micron’s most recent quarterly numbers were outstanding. Every business segment was on fire, margins exploded higher, and earnings continued to grow at a robust pace. Overall, the numbers indicated no meaningful slowdown from the preceding quarter.

And why should they? The demand catalysts pushing overall memory and storage demand higher are here to stay. Smartphones are only getting more complex, and their usage is only going up globally. Same with other smart devices.

Cloud data centers will continue to explode in usage as data translates into the new currency. And the closer we get to autonomous driving actually becoming thing, the more money will be pumped into that market.

The only thing that will hurt Micron’s profits is increased supply. That is coming, but supply increases will be gradual against robust demand growth. That implies that margins will fall, but it won’t be a big hit. Demand growth will still exceed supply growth.

Because it is trading at less than five times this year’s earnings, Micron stock won’t fall so long as demand growth exceeds supply growth.

Bottom Line on MU Stock

I’ve said it before and I’ll say it again: this a stock you want own while the music is playing, and a stock you want to sell before the music stops.

Right now, there are no signs of the music stopping any time soon. Consequently, Micron stock will head higher in the near term.

As of this writing, Luke Lango was long MU and AMZN.