Final yr, shares of synthetic intelligence (AI) chip inventory Micron Expertise(NASDAQ: MU) blasted larger by 239% — making it one of many top-performing shares within the Nasdaq-100 index.
Whereas this stage of momentum may recommend you’ve got missed your alternative to money in on the AI darling, what if I informed you the inventory stays grime low-cost even after its parabolic rise? Let’s dig into the tailwinds fueling Micron inventory proper now and discover why the corporate’s development is simply getting began.
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Picture supply: Micron Expertise.
With regards to headlines about AI chips, odds are buyers see references to Nvidia and Superior Micro Units greater than some other firm.
Nvidia’s roots are in designing graphics processing items (GPUs) — the {hardware} hyperscalers use to construct generative AI functions. The corporate’s deep roster of Hopper, Blackwell, and now Vera Rubin architectures have helped Nvidia obtain a 92% market share within the AI GPU area.
In a distant second is AMD, whose MI400 accelerators have began to draw enterprise workloads as large tech seeks to enhance their Nvidia infrastructure with a lower-cost chip stack.
As hyperscalers like Microsoft, Amazon, Alphabet, and Meta Platforms speed up their AI capital expenditures, GPU designers corresponding to Nvidia and AMD change into the apparent winners. However beneath the floor, Micron is maybe much more strategically positioned for the AI infrastructure revolution.
My rationale is that as extra knowledge facilities are constructed and outfitted with GPU clusters, AI workloads will scale as builders introduce new services. In flip, these dynamics create a bottleneck in reminiscence and storage options — exactly the market by which Micron operates.
Given the secular tailwinds fueling demand for HBM options, trade analysis means that the costs for dynamic random entry reminiscence (DRAM) and NAND chips may rise as a lot as 60% and 38%, respectively, throughout the first quarter.
These dynamics give Micron monumental ranges of pricing energy as hyperscalers improve their AI infrastructure budgets to be extra inclusive of HBM programs. In opposition to this backdrop, it is no shock the corporate has already reportedly offered out of its 2026 HBM stock — therefore, Wall Avenue’s bullish forecast.
For Micron’s fiscal yr 2025 (which ends Aug. 28), the corporate reported $7.59 in earnings per share (EPS). In keeping with Wall Avenue’s consensus estimates, Micron’s earnings are anticipated to be $33.73 per share in fiscal 2026 — representing over 340% development yr over yr.
Regardless of Micron’s potential, the inventory nonetheless trades at a reduction relative to different AI chip leaders based mostly on ahead price-to-earnings (P/E) traits. In my eyes, the disparity between Micron and its cohorts is as a result of cyclical nature of the reminiscence chip market.
Sensible buyers perceive that there aren’t many firms in Micron’s place — being on the cusp of driving a multi-year development arc underscored by rising AI infrastructure buildouts. I believe Micron’s valuation profile will normalize relative to its development potential all through 2026.
Ought to Micron commerce extra in step with different class leaders within the AI semiconductor market, the inventory may moderately soar anyplace between $650 to $800 — suggesting as much as 100% upside from present ranges.
For these causes, I believe Micron inventory stays extremely undervalued and is a no brainer purchase at its present value level.
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Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Idiot has positions in and recommends Superior Micro Units, Alphabet, Amazon, Meta Platforms, Micron Expertise, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Idiot recommends Broadcom. The Motley Idiot has a disclosure coverage.
