Micron Technology (NASDAQ:MU) is a leading producer of high-bandwidth memory chips that are crucial for quickly moving stored data to the processing chips that make modern AI models possible.
Micron’s stock price has risen more than 80 percent in the last year, including a gain of over 41 percent in just the last month. Why is Micron stock up so much, and could there still be value left to be found in MU for investors?
Why Is Micron Soaring?
The main driver of Micron’s soaring share prices has been its recent fiscal Q4 earnings report. Quarterly revenue rose to $9.30 billion against $7.75 billion last year, accompanied by a massive increase in net income from $887 million to $3.20 billion.
For the full year, revenue came in at $37.38 billion, while net income totaled $8.54 billion. This was far from an isolated win for Micron, as the business has delivered eight consecutive quarters of revenue growth and seven quarters of earnings growth.
In addition to the obviously positive nature of the earnings report itself, Micron has benefited from a series of price target increases. An analyst at Morgan Stanley, for example, recently raised MU’s price target to $220, banking on Micron’s potential to significantly raise its prices over the next several quarters.
Underpinning both Micron’s recent performance and analyst expectations for continued growth is the strong demand for its high-bandwidth memory for data storage and AI servers. Supply constraints for the kind of memory chips Micron specializes in are expected to continue through at least next year.
Indeed, Micron itself has already sold nearly all of the HBM chips it expects to produce in 2026. SK Hynix, another HBM leader, recently projected that the market as a whole would grow at an annualized rate of 30 percent through 2030 and approach $100 billion in total value.
Micron’s Competitive Edge
Although Micron has competition from other HBM manufacturers, the business enjoys something of an edge by virtue of being the only manufacturer based in the United States. Micron is currently investing around $200 billion to expand its US fab base, further entrenching its dominance in the American HBM market.
Given recent reports that the White House is considering tariffs of up to 100 percent on semiconductor imports, Micron could have a significant competitive advantage over its foreign peers.
Where Does MU’s Valuation Stand?
Even after its recent surge, Micron’s valuation remains surprisingly reasonable. Shares of MU currently trade at 24.5 times earnings, very closely mirroring the sector average of 24.9. It is worth noting, however, that its price multiples to sales and cash flow are markedly on the higher side at 5.7 times and 125.3 times, respectively.
At $185.69, Micron is also trading closely in line with the consensus analyst price forecast of $191.53. MU’s consensus rating is an overwhelming buy, with 25 analysts offering buy ratings, four offering hold ratings and none currently rating the stock as a sell.
Overall, Micron likely isn’t especially undervalued at its current prices, but there’s a decent argument to be made that the stock is trading in a roughly fair value range. The combination of a strong competitive position in the US market and general growth in demand for high-bandwidth memory could support progressively higher revenues, earnings and share prices over the next several years.
Micron’s Exposure to AI Risks
Despite extremely strong performance and a good competitive position in the HBM space, it’s worth acknowledging that Micron is exposed to the possible risks associated with AI as well as the potential upsides.
Recently, soaring AI stock valuations have been raising fears of a massive bubble developing around the technology. These fears have been added to by AI bulls like Sam Altman and Jeff Bezos acknowledging the very real possibility that such a bubble appears to be forming.
Micron’s Dividend Is Low But Solid
While the potential for earnings growth is obviously the major story for investors looking at Micron, it’s also worth noting that the stock offers a modest dividend with significant growth potential. Right now, MU shares yield only about 0.25 percent, paying $0.48 annually. With strong growth expected ahead, however, Micron could be in a very good position to raise its dividend in the years to come.
Is Micron Still a Good Buy?
Acknowledging that Micron could be exposed to substantial volatility in the event of an AI downturn, there’s still quite a lot to like about the business. Even though a bubble may be forming around AI, the general expectation is still that the technology will produce long-term value. As such, it’s likely that demand for HBM will remain strong in the long run.
With durable pricing power, strong net margins and a domestic competitive advantage, Micron seems to be in a good position for sustained growth.
Micron’s balance sheet is also quite strong, with total assets of $82.80 billion handily outweighing the $28.63 billion in total liabilities. Micron is even faring reasonably well in terms of ROE and ROIC, which have come in at 17.4 percent and 13.3 percent for the trailing 12-month period, respectively.
It’s also worth taking into account that MU shares don’t trade at the kind of extreme valuation that many AI-related stocks and tech startups are commanding in today’s market. With a P/E ratio of under 25 and substantial room ahead for further earnings growth as hyperscalers keep investing in AI infrastructure, Micron appears to be a good business that’s trading at a roughly fair price.
All told, Micron could still be a good buy for investors who are comfortable with the volatility that may result from changes in market sentiment around AI in the short term. Though it’s quite likely that Micron could see downward pressure if AI stocks sell off, there appears to be a good long-term market opportunity in the business. Combined with a reasonable valuation, this could make MU a strong long-term play on AI at a price point that’s more attractive than many other key players involved in developing and deploying the technology.
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.