Important points
- Micron’s AI memory segment sees strong demand, limited supply, and increasing HBM prices.
- For the fourth quarter of 2026, Micron anticipates revenue around $50 billion and an adjusted EPS of $31, surpassing market expectations.
- The company plans significant U.S. investments through 2035 to boost AI memory production and ensure silicon availability.
Micron Technology Co., Ltd. witnessed a massive surge in its stock during the first half of 2026, with an impressive nearly 340% increase. On June 24, they released their third-quarter fiscal results for 2026, which exceeded all predictions.
The next day, MU stocks reached an all-time peak of $1,255. Yet, since that high, the stock has dipped, currently showing a 22% decline and entering a bear market. However, this drop presents enticing opportunities for both short and long-term investors.
The graph below illustrates MU’s price trends over the past month.
Great business opportunity
Micron is greatly benefiting from the broad applications of AI in our daily lives, which has spiked the demand for its memory chips. The four largest hyperscale companies have ramped up their AI capital expenditures to $750 billion for 2026, a figure likely to surpass $1 trillion in the following year, with further increases anticipated after 2027.
This surge has led to a rise in AI semiconductor sales, necessitating multiple AI memory chips for optimal functionality. Technologies like DRAM and NAND are integral to AI chips, helping to maximize their performance.
This growing need has resulted in a significant demand for AI-enabled memory components. In their recent earnings reports, all four major hyperscalers mentioned substantial shortages of memory and storage chips, which has in turn led to price hikes for these items. Micron stands to gain greatly from this situation.
“We expect industry supply to gradually improve by 2028, but our clients understand that significant time will be needed before memory and storage shortages are resolved,” stated Micron’s CEO, Sanjay Mehrotra.
Revision of firm estimate
Micron forecasts revenue and profit growth exceeding 100% for the current fiscal year (ending August 2026). Over the past month, the Zacks Consensus Estimate for their earnings has risen by 22.6%.
For the upcoming fiscal year (to August 2027), MU anticipates sales and profit growth of 87.8%, which still signifies over 100%. The earnings estimate for next year has also climbed by 44.3% in the last month.
Micron’s gross profit margin climbed to 84.9% in the third quarter, up from 74.9% in the previous quarter and significantly higher than the 39% from the prior year. This reflects how the AI-driven data center boom and HBM scarcity have been driving up prices for high-end memory developers. Consistent improvements in the Zacks Consensus Estimate for 2027’s EBITDA margin have also been noted.
New technology trends to drive leads
The performance of AI models heavily relies on memory performance and capacity. Micron’s HBM is a favored product among customers like NVIDIA, AMD, and Alphabet—this highlights its integral role in providing AI-enabled chipsets.
Micron is deeply involved in AI, cloud data centers, industrial IoT, and self-driving vehicle technologies, all of which necessitate increasing advancements in memory solutions. The demand for DRAM and NAND products is set to grow as AI usage expands.
NVIDIA recognizes Micron as a key supplier of HBM for its GeForce RTX 50 Blackwell GPUs, underlining Micron’s critical role in its AI supply chain. The demand for HBM4 is also benefiting from new AI infrastructure launches, such as NVIDIA’s Vera Rubin platform.
On July 8, it was reported that Micron intends to invest over $250 billion in the U.S. by 2035. Initially, the investment plan was $170 billion but was raised to $200 billion in June.
Additionally, Micron has announced a $3 billion investment in GlobalWafers’ silicon wafer manufacturing in Texas, along with a 10-year agreement to secure the supply of raw silicon wafers for its AI memory chip production.
Strong guidance
Micron estimates fourth quarter 2026 revenue at $50 billion, with non-GAAP operating expenses around $1.65 billion. An adjusted EPS of approximately $31.00 is also expected.
Attractive valuation
Despite its robust surge, MU shares remain attractive. The trailing 12-month price-to-earnings (P/E) ratio is 13.43x, notably lower than the industry average of 27.73x, making it appealing for long-term investors.
MU’s price-to-sales (P/S) ratio stands at 12.41x compared to the industry norm of 10x, and the price-to-book (P/B) ratio is at 11.12x versus 8.40x in the industry. Given Micron’s strong position in the AI HBM and DRAM segments, these multiples justify a premium.
Huge price increase potential
Micron’s current Zacks Consensus Average price derives from short-term price targets determined by 33 analysts. The short-term price target reflects a potential 52.2% increase from the last closing price of $979.30.
Target prices among brokerages range from $2,000 to $470, indicating a possible upside of up to 104.2% and a downside of about 52%. This risk/reward ratio seems quite favorable at 1:2.
What’s next for MU?
Micron is rated #1 (Strong Buy) by Zacks. The company has made substantial investments in next-gen memory technology and is set to satisfy the growing demands of the AI ecosystem.
Micron presents an opportunity to invest in a firm that holds significant unrealized potential in the AI sphere. I think, at this moment, it might be wise to consider purchasing MU during price dips and holding onto it long-term, given its strong market position and the anticipated growth of global AI-driven data centers.
