After a powerful rally over the past year, Micron (MU) stock recently lost some momentum, falling 32% from its 52-week high of $471.34. The pullback reflects profit-taking by investors following the strong rally, as well as emerging concerns about potential shifts in demand in the memory market.
The recent uncertainty arises from the evolution of the artificial intelligence (AI) ecosystem. Alphabet (GOOGL) recently introduced TurboQuant, which reduces the memory requirements of AI models. Since memory and storage capacity are critical components of AI infrastructure, innovations that improve efficiency may raise questions about whether demand for memory hardware could eventually grow more slowly than expected. For companies like Micron, which supplies memory components used in data centers and artificial intelligence systems, these developments naturally put pressure on the stock price.
However, the broader outlook for MU stock remains constructive. Micron remains a key provider of memory and storage technologies for data-intensive applications, particularly those related to artificial intelligence and high-performance computing. As AI models become more sophisticated and computational workloads expand, demand for advanced memory solutions is expected to remain strong in the long term.
Looking ahead, Micron appears well positioned to benefit from these trends in 2026 and beyond. At the same time, Micron’s recent share price decline has significantly reduced its valuation. With MU stock trading well below its recent peak, Micron’s pullback has made its valuation too cheap to ignore.
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Growing demand for AI infrastructure and continued supply constraints in the memory industry are expected to continue supporting Micron’s earnings growth in the coming quarters. The company delivered exceptionally strong results in the fiscal second quarter, reflecting both improving pricing dynamics and strong demand in its core memory segments.
Micron reported fiscal second-quarter total revenue of $23.9 billion, up 75% sequentially and up 196% year-over-year. The largest contributor was Micron’s DRAM segment, which generated a record $18.8 billion in revenue and accounted for approximately 79% of the company’s total sales. Revenue in the segment increased 74% compared to the previous quarter and 207% year-over-year. While shipping volumes increased at a modest pace, prices provided the main push. Average selling prices increased in the mid-60% range, reflecting continued supply constraints and a shift toward higher-value memory products used in advanced computing systems.
Micron’s NAND flash business also posted record performance. Segment revenue reached $5 billion, representing an 82% sequential increase and a 169% increase from the prior year. As with DRAM, shipments grew slightly while prices rose sharply.
Micron’s profitability improved substantially along with revenue growth. Consolidated gross margin for the quarter reached 75%, an increase of 18 percentage points from the previous quarter. Margin expansion was primarily driven by higher pricing, supported by a favorable product mix and continued cost efficiencies.
Looking ahead, the current momentum is expected to continue as demand for AI infrastructure drives further growth in memory consumption. AI workloads are expanding the total addressable market for both DRAM and NAND in data centers. Demand for traditional servers also remains strong, supported by emerging agent AI application workloads and an extensive server upgrade cycle.
Beyond the data center market, Micron is also benefiting from improving pricing trends in the automotive, industrial and embedded segments. At the same time, the emergence of AI capabilities in devices is expected to increase memory requirements in personal computers and smartphones, creating an additional long-term growth engine for the company.
Reflecting these favorable industry conditions, analysts expect earnings to rise sharply in the coming years. Consensus estimates that the project’s EPS will be $57.70 by fiscal 2026, representing more than 651% year-over-year growth. This is expected to be followed by a further EPS expansion of over 67% in FY2027 to $96.55.
Micron’s recent pullback has created an attractive buying opportunity for investors. Despite the decline, Micron’s underlying growth prospects remain strong, making the current valuation compelling.
Currently, Micron trades on a forward price-to-earnings (P/E) ratio of approximately 6.2 times. This multiple appears remarkably low relative to the company’s earnings growth prospects, suggesting MU stock is undervalued.
Wall Street sentiment toward Micron remains positive. Analysts maintain a “Strong Buy” consensus rating on the stock.
Taken together, Micron’s strong growth prospects, low forward earnings multiple, and favorable analyst sentiment suggest MU stock is too cheap to ignore.
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On the date of publication, Sneha Nahata had no (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
