The Case for Buying This Under-the-Radar AI Stock Before Its Next Big Catalyst

Micron Technology (NASDAQ: MU) is one of the most prominent manufacturers of high-performance memory (DRAM and HBM) and storage devices (SSD, 3D NAND) for computing today.

We've all seen headlines about artificial intelligence (AI) chips, data center infrastructure, and connectivity hardware, but memory is one crucial component in AI. For example, each Nvidia Grace Blackwell GPU uses 192GB of memory that serves as short-term, fast-access storage. Faster memory means lower latency, faster calculations, and quicker results.

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Now, like many AI-adjacent companies, Micron stock has experienced big year-to-date gains, gaining about 200%. But based on its current valuation and analyst ratings, many investors could be missing out on its full potential.

The chart of a late bloomer

Unlike many AI tech stocks that experienced explosive growth during the past three to five years, Micron's bull run mostly started in 2025.

As of Dec. 8, its five-year return is 236%, with the vast majority of that gain coming this year. And during the past 52 weeks, Micron's stock has traded in a range from a low of $61.54 to its recent trading price of about $252.

So, yes, a lot of us slept on Micron stock before, but that's changing, especially with recent developments in the AI sector.

Memory prices are through the roof

With AI spending in full swing, there's now a shortage in AI-grade memory solutions. As a result, Samsung recently announced a 60% increase in memory chip prices, while DRAM and 3D NAND contract prices for December 2025 have increased between 80% and 100%.

Meanwhile, retail customers are reportedly paying up to 171% more for memory. The shortage is so severe that even phone and car manufacturers are expecting to get hit next year.

Unfortunately, shortages often lead to higher production costs due to limited raw materials, delayed (and usually smaller) orders, and potentially narrower margins. However, it's not all doom and gloom for Micron.

How Micron is playing the shortage to its advantage

Micron recently announced a $9.6-billion investment in a new facility in Japan to expand its existing Hiroshima plant. The company plans to ship HBM chips from the facility in 2028.

But how will that help with the current shortage?

Short answer: It won't.

For now, all Micron can do is maximize its revenue streams, manage margins, and most importantly, position itself as the prime supplier of AI and data center memory chips. It's already taking bold steps in that direction by exiting the consumer-grade memory market to focus on high-powered AI memory solutions.

When the new HBM facility does come online, Micron can easily ramp up high-margin chip production, fill pent-up demand from AI and data center customers, and immediately capture market share before anyone else can react.

Of course, this is all assuming AI spending continues as it has. But if you're looking for a few more reasons to buy the stock right now, look no further than its valuation and analyst ratings.

Cheap stock, high upside

Right now, Micron is trading at about 31 times price-to-earnings (P/E) while the broader sector trades at nearly 40. That means, despite Micron's bull run this year, the stock is still cheap compared with its peer group.

Meanwhile, analysts tracking the stock have an average price target of $338, suggesting as much as 34% upside from today's levels. Even better, analyst scores have increased from 4.49/5 to a near-perfect 4.65/5 during the last three months. That means Wall Street is growing even more bullish on the stock.

So if you're looking for exposure to AI memory, Micron might just be your ticket.

Rick Orford has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.