Stock Prices of Micron at Ten Times Earnings: Could Artificial Intelligence's Top Deal Be This?

Micron Stock Valued Ten Times Earnings: Potential Top Pick for AI?

In a significant shift, Micron Technology (MU) has seen its stock surge primarily due to strong demand for DRAM and High-Bandwidth Memory (HBM) products linked to AI infrastructure growth. This marks a transition from Micron being a purely cyclical memory play to a more secular growth narrative centered on AI-driven demand.

Key factors behind this surge include:

Raised Q4 Fiscal 2025 guidance: Micron increased its revenue forecast by $500 million and raised EPS guidance to $2.85, citing better DRAM pricing and strong operational execution, resulting in a 250 basis point gross margin improvement[1].
AI-driven memory demand: Analysts from Cantor Fitzgerald upgraded their ratings with a $155 price target, projecting 77% EPS growth by 2026. This is fueled by accelerating AI infrastructure spending that requires premium memory products like DRAM and NAND. Micron’s investments in HBM position it as a leader in AI memory markets[3].
Strong HBM supply sold out for 2025: Indicative of robust ongoing demand tied specifically to AI chips and accelerators, which use HBM for faster memory access[5].
Shift in narrative: While traditionally tied to cyclical memory pricing swings, Micron is increasingly seen as a cornerstone of the AI memory market’s secular expansion, benefiting from structural tailwinds rather than purely cyclical factors[3][5].

Micron serves as a crucial supplier for Nvidia's latest Blackwell GB200 platform and AMD's Instinct MI350 series GPUs, highlighting its role in the AI hardware ecosystem[7]. The company's HBM business has higher margins, enhanced pricing power, and better order visibility[2]. In recent quarters, HBM constituted about 15% of Micron's total revenue, but this proportion is expected to increase moving forward[6].

The capacity-intensive nature of HBM may be supporting DRAM pricing and overall margins for the company[8]. Micron aims to significantly increase its HBM market share, targeting about 20-25% of the HBM sector by late 2025[9]. Currently, Micron is the sole volume producer of low-power DRAM for data centers[10].

The demand for HBM is driven by multi-year AI infrastructure expansions and long-term supply agreements with partners like Nvidia[11]. The surge for Micron is primarily driven by demand for AI infrastructure, boosting sales of high-bandwidth memory products (HBM)[4]. Micron's Q3 gross margin increased to 39.0%, an increase of 110 basis points sequentially[1].

The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks offers a responsive means to leverage favorable market conditions while minimizing losses during downturns. The Trefis Reinforced Value (RV) Portfolio has outperformed its all-cap stock benchmark, producing significant returns for investors[12]. Micron Technology stock increased by approximately 6% in the last month and is up nearly 40% year-to-date[13].

However, the relatively elevated valuation of Micron's stock limits its upside potential in the near to mid-term[14]. The demand for HBM is stemming from the swift adoption of generative AI, which necessitates high-performance memory to function at scale[11]. The surge in revenue from data centers more than doubled year-over-year last quarter for Micron[4]. HBM revenue surged nearly 50% quarter-over-quarter during Q3 FY'25, reaching a $6 billion annualized run rate[15].

In conclusion, Micron's strategic focus on AI-driven markets and its leadership in HBM production position it well for continued growth. The company's strong operational performance and increasing market share in HBM are key drivers of this growth narrative. Despite the elevated valuation, the robust demand for HBM and Micron's position in the AI hardware ecosystem suggest that the company remains an attractive investment opportunity for those seeking exposure to secular growth trends in technology.

[1] Micron Technology Increases Q4 Fiscal 2025 Guidance [2] Micron's HBM Business Gains Momentum [3] Micron Technology: A Leader in AI Memory Markets [4] Micron Technology Q3 2025 Earnings: What to Expect [5] Micron Technology's Q3 2025 Results: A Closer Look [6] Micron Technology's HBM Revenue to Increase [7] Micron Technology Supplies HBM for Nvidia and AMD GPUs [8] Micron's Capacity-Intensive HBM Production Boosts Margins [9] Micron Aims to Increase HBM Market Share [10] Micron Remains the Sole Volume Producer of Low-Power DRAM for Data Centers [11] The Demand for Micron's HBM Driven by AI Infrastructure Expansions [12] Trefis Reinforced Value (RV) Portfolio Outperforms All-Cap Stock Benchmark [13] Micron Technology Stock Up Nearly 40% Year-to-Date [14] Micron Technology's Relatively Elevated Valuation Limits Upside Potential [15] Micron Technology's HBM Revenue Surges in Q3 2025