The semiconductor sector is experiencing a surge, largely thanks to the advancements in artificial intelligence (AI). These cutting-edge chips are critical, but they aren’t the only component needed for this technology.
Micron Technology (NASDAQ:MU) stands out as a major provider of memory and storage chips. These are essential for data centers, which are at the forefront of AI development, as well as for personal devices like computers and smartphones, where AI applications are becoming more prevalent.
In 2025, Micron’s stock saw an impressive 239% increase, making it a standout in the semiconductor field. It has continued positively into January 2026, gaining another 29%. This raises an interesting question for investors: how long can this upward trend continue?
The graphics processing unit (GPU), particularly those provided by Nvidia, is the main chip supporting AI innovations. Alongside high-bandwidth memory (HBM), which is critical for optimal processing speeds, these elements facilitate everything smoothly. If the data flow isn’t seamless, the GPU will have to take breaks waiting for information, and that can seriously hinder performance for AI tasks.
Micron’s HBM3E chips boast 50% more capacity than competing products while using 30% less energy, leading major companies like Nvidia and Advanced Micro Devices to incorporate them into their latest GPU models.
The company is also on the verge of increasing its production of the HBM4E chip, which promises an additional 60% in capacity and a 20% boost in energy efficiency. In fact, the supply for 2026 has already been fully booked.
Sanjay Mehrotra, Micron’s CEO, estimates that the HBM market for data centers will triple by 2028, potentially reaching over $100 billion annually. This represents a massive opportunity for the company, as profitability from memory chips for consumer devices also looks promising with more AI functions transitioning to smartphones and PCs.
In Micron’s first quarter of 2026, which ended on November 27, 59% of flagship smartphones from its clients needed at least 12 gigabytes of memory for AI applications—this is more than double the figure from the same quarter last year.
The total revenue for Micron in that quarter hit $13.6 billion, marking a 56% year-on-year increase, which is a record. Their cloud memory division, reporting HBM sales, contributed around $5.3 billion—twice the revenue from the previous year.
Given the shortage of HBM across the board and Micron’s sold-out supplies, the company enjoys significant pricing power that boosts profit margins. First-quarter earnings spiked by 175%, reaching $4.60 per share, with the outlook suggesting even greater growth ahead.
Management guidance indicates sales could climb by 132% year-over-year to $18.7 billion during the second fiscal quarter ending February. Earnings could rise sharply as well, by approximately 480%, predicting earnings per share at around $8.19.
As the stock price has surged, investors are now reassessing Micron based on its robust revenue growth and the recent spike in stock value.
The semiconductor industry usually follows a boom-and-bust cycle. Historically, companies would invest heavily in infrastructure, then wouldn’t purchase chips for years until upgrades were necessary. However, the demands of AI are such that some major data center operators are now buying new chips annually.
Micron’s stock is likely to rise as long as this rapid upgrade cycle persists. According to Nvidia CEO Jensen Huang, infrastructure investments may increase significantly, potentially reaching up to $4 trillion a year by 2030 to fulfill the requests of AI developers. This trend could greatly benefit Micron since its memory chips are integrated into top GPUs from Nvidia and AMD.
Currently, Micron’s stock trades at a price-to-earnings ratio of 38.6, based on trailing earnings of $10.52 per share, which is still notably cheaper compared to Nvidia’s P/E of 46.8.
Looking ahead, projections from Wall Street anticipate Micron’s earnings to increase to $33.17 per share in fiscal 2026, suggesting a forward P/E ratio of just 12.2. Under this lens, it appears to be quite an enticing opportunity. To maintain its current P/E ratio, though, Micron’s stock would need to more than triple in the coming year.
It’s hard to say how achievable that is. Wall Street acknowledges that such rapid growth cannot perpetuate indefinitely, which might lead investors to adjust their expectations. But, even if Micron’s price doesn’t skyrocket this year, it could still outpace the overall market as it did in 2025.
If you’re considering investing in Micron Technology, keep a few things in mind:
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Anthony Di Pizio does not have holdings in any of the mentioned stocks. The Motley Fool has interests in and recommends Advanced Micro Devices, Micron Technology, and Nvidia. More details are available through the disclosure policy.
How high could Micron’s stock be? Originally published by The Motley Fool
