Is Micron Stock a Buy Now?

Micron Technology (NASDAQ: MU) has emerged as one of the top AI investment picks in recent months. The stock has been on an absolute tear and is up 180% over the past six months. After a run like that, it's reasonable to reassess the stock and see if it could climb higher, or if this rally was too far and too fast.

Let's take a look at Micron Technology and see if it's worth buying right now or not.

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Memory chip demand is unprecedented

Micron makes memory chips, an important part of any computing application. Unlike with logic chips, there really aren't a lot of differentiating characteristics between one company's product and its peers. This has caused the memory chip price to become fairly commoditized, which eliminates pricing power. Micron's business is subject to the demand for memory chips, and there has rarely been higher demand, thanks to the massive AI buildout.

Because all memory production is spoken for, prices for chips have skyrocketed. Just take a look at what the price of a RAM stick was a year ago versus what it is today -- that will tell you how much it has gone up. Because of the massive demand, Micron's profits are soaring, which is why investors are buying the stock.

While competitors are racing to get new production online to meet demand, this takes some time. Micron expects its Idaho facility to be producing chips by mid-2027, and to have a second facility by 2028. That is needed because Micron expects huge memory chip demand growth over the next few years.

The total addressable market for its high bandwidth memory (HBM, the type needed for AI applications) is expected to rise from $35 billion in 2025 to $100 billion by 2028. That's huge growth over the next few years, and could cause Micron's stock to skyrocket.

However, there's one thing investors must keep in mind: cyclicality. The memory chip market is notoriously cyclical, and once AI demand has been satisfied, it may be a long time before Micron experiences demand of this magnitude again. This will cause memory prices to crash and Micron to lose its cash cow. When this would occur is anyone's guess. It could be in several years, a decade, or the next month. This unknown is why Micron's stock isn't priced all that expensively.

MU PE Ratio (Forward) data by YCharts.

The stock trades at 11 times forward earnings, which may seem cheap, but that's the market pricing in its cyclicality. If AI demand persists for several years, Micron could be a genius investment. However, if the memory chip supply constraint is remedied in a short timeframe, Micron's stock may not be the best buy, as prices would come down, dragging profits with them. Micron is not a set-it-and-forget-it stock; investors continuously monitor it to make sure their thesis is intact. If you're willing to do that, then Micron could be a genius stock pick right now.

Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.