Micron Technology (MU)

[B RY]

"There are many reasons for investors to doubt the durability of Micron’s (NASDAQ: MU) AI boom and the AI boom in general, but one key factor is too significant to ignore—and it trumps all the concerns.

AI is a power-hungry technology. Its growing energy demands are already pushing data centers and chip suppliers to focus on energy efficiency and heat reduction, while accelerating wear on underlying hardware.

Estimates vary, and it’s still early in the game, but experts tend to agree that the AI datacenter upgrade cycle will be accelerated. Some believe it could require a complete refit of equipment every 18 to 24 months, which is about twice as fast as traditional hardware cycles. Add in the fact that upcoming generations of GPUs—NVIDIA’s (NASDAQ: NVDA) Vera Rubin and Advanced Micro Devices' (NASDAQ: AMD) MI450 line, for example—and the cycle may be even shorter.

In a world where HBM demand is so high that capacity is sold out for the foreseeable future and prices are skyrocketing, Micron is well-positioned.

Each AI GPU requires numerous stacks of High Bandwidth Memory (HBM), setting the stage for Micron to continue growing and then sustaining its revenue at a very high level.

As it stands, Micron is trading in deep value territory relative to current-year and next year’s earnings forecasts. Beyond that, the projections aren’t serious. They have not seen significant revisions for months and lag the outlook, expecting revenue to decline in fiscal year (FY) 2028 and to accelerate in FY2029.

The likely outcome is that Micron continues to outperform, with analysts upgrading forecasts for long-term revenue and earnings, which should lift stock prices. Even so, the 5x valuation relative to the FY2027 estimate suggests this stock could rise by at least 100%, and potentially as much as 400%, to align with the broader market. Assuming the market decides it's time for Micron to command a premium, thousands of basis points (bps) would be added to this forecast."