Deeply Undervalued, Micron Technologies Stock Isn't Pricing in AI

Micron Technologies' (NASDAQ: MU) stock is in rebound mode as of mid-August and will likely continue higher because its market has yet to price in the long-term impact of AI. AI is a memory-intensive technology, and its needs are expected to grow exponentially with each upcoming generation.

Not only is Micron’s technology in demand from both leading GPU manufacturers, but the market dynamic is set up for accelerated demand in 2026. 

Advanced Micro Devices (NASDAQ: AMD) AI-focused GPUs have significantly more memory than NVIDIA’s (NASDAQ: NVDA) designs and are expected to begin gaining share in 2026. AMD’s new, rack-scale capability will underpin the share gains and, by extension, demand for Micron HBM4 technology.

The estimates regarding the GPU market and outlook vary from source to source, but they generally agree that GPU needs will grow at a solid, double-digit CAGR for the next five to ten years. 

Regarding Micron and its value, assuming the 15 times P/E valuation it is running in mid-August is fair value, the stock presents a deep value to long-term buy-and-hold investors.

The consensus forecast reported by MarketBeat puts this stock at only 8x earnings within two years, suggesting the potential for a nearly triple-digit stock price increase. Assuming the long-term forecasts are too low, and they are, the value deepens.

Micron’s Growth Outlook Underpinned by AI… and Market Normalization

Not only is AI underpinning Micron’s long-term outlook, but normalization within legacy end markets is also in play. While YOY contraction persisted in some segments in FQ3, all produced sequential strength and are expected to return to growth in Q4 or early in the subsequent fiscal year.

This provides a solid foundation for the DRAM business, which includes the data center (more than 50% of the revenue in Q3) and HBM markets. HBM sales grew more than 50% sequentially in Q3 from Q2, driving the data center business to more than double, and the guidance was also strong.

The company forecasts another high 30% growth pace and is expected to outpace its target by the analysts. 

The analysts' trends are robust, including numerous revenue and earnings forecast adjustments that forecast Micron's strength. MarketBeat reveals that 21 of 23 analysts issuing revenue and earnings forecasts, or more than 90%, have lifted their quarterly forecasts, setting a high expectation bar.

The consensus as of mid-August is significantly higher than the company’s guidance, with the revision trend leading to an above-consensus result. A consensus-beating result is a bullish market catalyst and likely to send the stock higher. 

The stock price outlook is equally robust. MarketBeat tracks 26 analysts with current ratings, most of which were refreshed following the FQ3 release. The trends include upgrades, firming sentiment, and price target revisions that lead to the high-end range.

The consensus forecasts a 15% upside that may be achieved before the upcoming FQ4 release, while the high-end range adds 35%. At the same time, commentaries focused on volume and pricing strength, a favorable demand/inventory environment, and an expectation for sustained improvement.

Micron Stock Is Poised to Move Higher

Micron’s stock price action in mid-August confirms the rebound and uptrend that began in April and gained momentum with the Q3 release. The August action has the market poised to set a new long-term high, opening the door to another sustained updraft in the stock price.

The market could rise by as much as $20 in the near term and over $60 in the longer term, matching the rallies that preceded the breakout. Micron’s stock price is headed to the $150 to $190 range in this scenario, enough to push the market to record high levels at the top of the analysts' range. 

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The article "Deeply Undervalued, Micron Technologies Stock Isn’t Pricing in AI" first appeared on MarketBeat.