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Micron Technology stock has nearly tripled in value this year.
The stock trades at a modest valuation.
The spending in AI data centers is a growth opportunity for Micron.
Micron Technology (NASDAQ: MU) has been one of the best-performing semiconductor stocks over the last six months. Investors might be hesitant to buy it after it's surged 182% year to date, but keep in mind, Micron shares still trade at just 14 times next year's consensus earnings estimate. Further momentum in selling memory chips to data centers could send the stock to new highs in the new year.
Image source: Getty Images.
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Micron's memory products are sold into several items like smartphones. But there is a great need for more memory and storage capacity to handle the massive data sets that are used in training artificial intelligence (AI) models.
Sales of Micron's high-bandwidth memory and server products hit $10 billion this year, which is five times the level of sales last year. "As we enter fiscal 2026, Micron is positioned better than ever," CEO Sanjay Mehrotra said on the fiscal fourth-quarter 2025 earnings call in September.
The risk for Micron is that the memory chip market is historically very cyclical, but the AI opportunity might be extending the current cycle longer than previous ones. Large tech giants continue to pour billions into data centers for AI. The company noted that the top five cloud providers are expected to spend over $400 billion in 2025, which will benefit Micron. Sales surged 49% year over year to reach $37 billion in fiscal 2025, and analysts project sales will hit $54 billion in fiscal 2026 for an increase of 46%.
Analysts expect Micron to report adjusted earnings per share of $16.71 in fiscal 2026 and $18.79 in fiscal 2027. This means the stock could climb to $263 if it continues to trade at its current forward earnings multiple of 14. More gains could be in store if Micron exceeds these earnings estimates, which is a possibility considering the accelerating amount of spending going into AI right now.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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