Micron Technology (NASDAQ:MU) is a manufacturer of high-bandwidth memory chips essential for AI data centers, vehicle automation and other advanced technology. After notching gains of more than 350 percent in the last 12 months, MU shares tumbled on Tuesday and Wednesday, giving up a little over 13 percent of their value. What’s putting downward pressure on MU, and how high could Micron stock go this year if and when it mounts a recovery?
Why Did Micron Sell Off This Week
Like many tech businesses, Micron’s selloff on Tuesday and Wednesday was the result of growing unease among investors about AI stocks and the massive growth assumptions baked into their high price tags. Mega-cap tech stocks have been some of the hardest hit, though stocks like MU that are AI-adjacent have also suffered large losses. It’s worth noting that selling activity in Micron this week appears to have been triggered almost entirely by market sentiment and valuation concerns, rather than any negative developments from the business itself.
Micron’s Overvalued After Its Pullback?
Even after a fairly significant drop, Micron is still valued at about 36 times trailing 12-month earnings. Though this may seem quite high, the high rate of earnings growth expected to prevail over the coming year places MU shares at only about 13 times forward earnings. This pricing, already attractive on its own, is also well below the sector average.
Indeed, the drop that Micron experienced this week has also brought it more closely into line with analyst price targets. MU shares now trade at $378.78, with the average analyst consensus price of $371.68 implying a downside of less than 2 percent. MU’s recent pullback may have created an opportunity for investors to buy the stock at less of a premium, though it’s worth keeping in mind that the current volatility surrounding Micron and other tech stocks could easily result in further downward pressure on share prices in the short term.
The Bull Case for MU Is Memory Shortages
While Micron is facing quite a lot of volatility at the moment, there’s still a decently strong bullish argument to be made for it. The large amounts of capital being poured into data center construction seem unlikely to slow in the near future. Recently, demand for HBM has significantly outstripped supply, leading to price increases of up to 60 percent in 2025. Micron is a major beneficiary of this trend due to its position as one of the three large manufacturers of HBM chips. Furthermore, the rapid replacement cycle that is increasingly coming to define AI hardware substantially benefits Micron and other HBM manufacturers.
Crucially, Micron is also the only manufacturer of advanced memory semiconductors in the United States, giving it substantial advantages in a global trade environment increasingly marred by tariffs and supply chain challenges. In addition to existing facilities in the US, Micron recently broke ground on a megafab in New York that will become America’s largest semiconductor manufacturing facility. This is part of a broader set of investments totaling about $200 billion that Micron is making to expand and upgrade its domestic production capabilities.
Micron has also turned in several quarters of remarkably strong performance, showing that its role in the memory chip sector is translating directly to improvements on both its top and bottom lines. The lowest quarter of revenue growth in the last two years saw revenues climb by 36.6 percent, while the highest saw a growth rate of over 93 percent. Net income growth has been even more pronounced, with year-over-year growth rates ranging from a low of 99.6 percent to a high of 467.8 percent over the last eight quarters.
These trends were still strongly on display in Micron’s fiscal Q1 report, released in December. Revenue for the quarter rose by 56.6 percent to over $13.6 billion. Once again, this was outstripped by net income growth, with earnings per share rising to $4.60 from just $1.67 in the year-ago quarter. For Q2, Micron is expecting further revenue growth to about $18.7 billion, with EPS surging to $8.19 per share.
Looking further out, analysts expect to see Micron’s earnings compound at an annualized rate of over 50 percent annually through the next 3-5 years. This assumption requires ongoing investment in data center construction that will keep HBM prices high and create demand for as much memory as Micron can produce. Given the amounts that have already been invested by the large AI hyperscalers in the effort to gain competitive edges in AI, though, it doesn’t seem likely that spending on data centers will slow in the immediate future.
How High Could Micron Go in 2026?
Right now, Micron’s prices are being heavily impacted by market sentiment. However, the stock’s longer-term performance will depend much more on its ability to keep delivering strong earnings growth and ongoing investments in AI. Fortunately, current trends suggest that Micron will likely see substantial ongoing growth due to the scarcity of HBM and its position as one of only three large manufacturers.
Even adjusting for significant compression of its premium to earnings, it’s far from difficult to imagine MU shares rising by 50 percent or more over the next 12 months if it can produce anything like the kind of earnings growth that both analysts and Micron’s own management expect from it. It’s worth keeping in mind that the $8.19 that management itself calls for in fiscal Q2 would represent a year-over-year EPS growth rate of well over 400 percent. If this sets the tone for the rest of the fiscal year, MU shares could easily double and still see their P/E ratio retreat to much lower levels.
While MU’s performance over the next year could be choppy, the recent pullback could create a buying opportunity in a high-quality business that is primed to take advantage of the ongoing surge in AI data center investment. As a manufacturer of advanced memory chips, Micron represents something of a pick-and-shovel play on AI that could be attractive in the long run.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.