Pricing Power Returns at the Top of the CycleThin moat

The oligopoly's pricing power is real, and the current boom shows it vividly — but it is a cyclical power, present at the top of the cycle and absent at the bottom, and understanding that distinction is essential to sizing the moat honestly. When demand outstrips supply, as it does dramatically in the AI-memory boom, three disciplined makers can raise prices sharply, and memory that was near-worthless in the last downturn commands premium pricing; Micron's gross margins have swung from the mid-forties to nearly eighty-five percent as the market tightened. That swing is the oligopoly's pricing power made visible, and it is a genuine improvement over the fragmented past, where even booms brought only fleeting relief.

But the same swing reveals the limit. Pricing power that appears at the top of the cycle and vanishes at the bottom is cyclical, not structural — it is a function of the supply-demand balance, which the three players influence but do not control, rather than a durable feature like a brand or a switching cost that holds prices up in good times and bad. When demand weakens or supply catches up, the identical-commodity nature of memory reasserts itself and prices fall hard, as they always have. So the pricing power is best understood as the oligopoly's ability to earn outsized returns during the up-cycles and to lose less (or merely earn little) during the downs — a real and valuable improvement, but a far cry from the steady pricing power of a true wide-moat business. The current eighty-five-percent margins are the pricing power at its absolute zenith, and an investor must remember that what the cycle gives, the cycle takes away — as it did in fiscal 2023's near-$6B loss¹.