In the rapidly evolving landscape of artificial intelligence, Micron Technology (MU) has emerged as a critical supplier of memory solutions fueling data centers and AI accelerators. The stock is up 44% year-to-date and nearly 350% higher over the past year.
With that kind of performance, it might seem odd to characterize Micron as “overlooked,” but when you realize the massive runway still before and how cheap the stock is, it becomes clear not as many investors realize the opportunity that awaits.
Giving a Memory Boost
Micron’s momentum stems from soaring demand for high-bandwidth memory (HBM) and DRAM – both essential for handling massive AI workloads. Micron’s entire 2026 HBM production is fully committed under long-term contracts with hyperscalers, prompting a massive $200 billion investment in capacity expansion to address the ongoing memory supply crunch.
Unlike flashy GPU leaders like Nvidia (NVDA), Micron operates behind the scenes, providing the foundational memory chips that enable efficient data processing. Its products, including the upcoming advanced HBM4 generation, support AI systems from multiple vendors. With AI applications devouring wafer capacity at triple the rate of traditional uses, Micron holds about 21% market share in HBM, trailing SK Hynix but capitalizing on industry-wide shortages projected to last through 2027.
Ratings upgrades, such as Standard & Poor’s recent BBB boost, underscore Micron’s improved profitability driven by premium products. The company is also ramping up U.S. manufacturing with over $6 billion in CHIPS Act funding for a new megafab in Syracuse, alongside facilities in India, Singapore, and expanded NAND operations.
Surging Financials and Growth Projections
Micron’s fiscal first quarter results shattered expectations with record revenue of $13.64 billion – a 57% year-over-year jump – and non-GAAP earnings of $4.78 per share. Operating cash flow hit $8.41 billion, up 47% sequentially, while adjusted gross margins expanded to 56.8%. This performance reflects disciplined pricing, a shift toward high-margin AI products, and supply constraints bolstering margins.
Looking ahead, Micron’s Q2 guidance – set for release on March 18 – projects $18.7 billion in revenue, a 132% annual increase, with EPS around $8.42 and gross margins of 67% to 69%. Analysts forecast full-year fiscal 2026 revenue at $76 billion, more than doubling 2025’s $37.4 billion, and EPS quadrupling to $33.92. Capital expenditures are pegged at $20 billion, focused on backend enhancements to meet AI-driven bit shipment growth of about 20% in both DRAM and NAND.
Comparatively, Micron’s forward P/E ratio of 9 stands well below the semiconductor sector’s 25x average, despite projected 80% annual earnings growth over five years. Peers like Western Digital (WDC) and Seagate Technology (STX) trade at premiums, highlighting Micron’s undervaluation amid the AI supercycle. As AI infrastructure spending shows no sign of slowing, MU’s current valuation is a bargain.
Bottom Line
Micron Technology remains a compelling investment in the AI ecosystem, blending structural demand tailwinds with attractive valuations. While cyclical risks persist in memory markets, the shift to AI-centric production and sold-out inventories position it for sustained outperformance.
Investors eyeing long-term growth should consider Micron as a discounted entry into the AI hardware boom, with potential for significant returns as capacity ramps up and aligns with insatiable demand.
— Rich Duprey
$3 billion+ in operating income. Market cap under $8 billion. 15% revenue growth. 20% dividend growth. No other American stock but ONE can meet these criteria... here's why Donald Trump publicly backed it on Truth Social. See His Breakdown of the Seven Stocks You Should Own Here.
Source: Money Morning