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Micron Technology (MU -0.77%) has faced significant challenges this month, with its stock price plummeting by 20%. One major factor contributing to this downturn is the tumult surrounding tariffs. Reports indicate that Micron may be considering raising prices on its memory products as a consequence of the ongoing trade conflict, which impacts its global manufacturing operations spread across the U.S., Japan, Taiwan, and China.
Despite these concerns, it’s essential to note that semiconductors have, so far, been exempt from tariffs by both the U.S. and China. Additionally, the Trump administration has instituted a 90-day pause on reciprocal tariffs that would have affected various trade partners. Notably, imports of memory chips and hard drives from China have been exempted, easing potential price increases for Micron’s customers.
This scenario alleviates the pressure on Micron to raise prices, as doing so might harm demand by increasing costs for customers. Furthermore, the company’s memory products are currently in high demand, which has led to production challenges. This was reflected in Micron’s strong performance in the last quarter and the positive outlook it has for the current quarter.
Given these dynamics, an analysis of Micron’s stock following its recent decline suggests that now might be an opportune time to consider investing.
Micron’s Valuation is Compelling
Despite posting a remarkable 38% increase in revenue year over year in the last quarter, Micron’s current valuation suggests it is a stock worth acquiring. Presently, the company is trading at less than 17 times its trailing earnings, while its forward earnings multiple is even lower at 10.
In comparison, the tech-heavy Nasdaq-100 index is trading at a trailing price-to-earnings ratio of 27 and a forward multiple of 23. This indicates that Micron stands out as comparatively undervalued, especially in light of its recent impressive growth metrics.
Moreover, when assessed through its price-to-earnings-to-growth (PEG) ratio, currently sitting at an attractive 0.15, Micron demonstrates significant potential for future earnings growth. A PEG ratio below 1 typically signifies that a stock is undervalued relative to expected growth, reinforcing the case for Micron as an attractive investment in light of anticipated growth driven by advancements in artificial intelligence (AI).
Demand for Memory Boosted by AI Expansion
Micron’s prospects are further buoyed by the accelerating demand for high-bandwidth memory (HBM) chips, which are increasingly essential for graphics processing units (GPUs) that facilitate AI workloads in data centers. In fact, Micron has seen a threefold increase in data center revenue year over year, with HBM sales alone reaching a record $1 billion in quarterly revenue.
According to the company, HBM shipments have surpassed expectations, with all available capacity for 2025 already sold out. Micron is actively expanding its HBM production capabilities to meet escalating demand through 2026. Notably, Micron has revised its total addressable market (TAM) for HBM to an impressive $35 billion by 2025, a figure which is expected to increase as market dynamics evolve, with forecasts suggesting that the HBM market could grow to nearly $86 billion by 2030.
Beyond the data center sector, Micron’s memory components are also crucial in smartphones and personal computers (PCs). As AI technology becomes more prevalent, the demand for memory in these devices is soaring. For instance, the dynamic random access memory (DRAM) content in AI-enabled PCs has increased by a third compared to average usage last year, while flagship AI smartphones are now featuring up to 50% more DRAM than the previous year’s models with 8 gigabytes (GB).
Expectation of robust shipments for AI-capable smartphones and PCs is projected to grow consistently at an annual rate of around 35% until 2029. This surge is likely to bolster Micron’s memory shipments long-term, further enhancing the already strong trajectory of its data center business.
Consequently, Micron Technology’s future looks promising, and with its current stock valuation, investors may find a rare opportunity to acquire shares at an attractive price. The strong growth potential tied to AI advancements positions Micron to rebound from its recent challenges and potentially achieve greater heights in the future.
Source
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