Is It Too Late to Buy Micron Technology Stock After Its 12-Month Gain of 700%?

Micron Technology (NASDAQ: MU) is one of the world's leading suppliers of memory hardware for computers, smartphones, and data centers. The company is experiencing more demand than it can possibly supply for its data center high-bandwidth memory (HBM), which is a crucial component for running artificial intelligence (AI) workloads.

As a result, Micron's revenue and earnings are growing at a lightning-fast pace right now, which has sparked a gain of more than 700% in its stock over the last 12 months. Is it too late to invest in this semiconductor powerhouse, or is more upside on the horizon?

Image source: The Motley Fool.

Demand for memory is skyrocketing

Graphics processing units (GPUs) are the main data center chips used for both training and deploying AI models. HBM stores information in a ready state for GPUs to access quickly, which maximizes their processing speeds. A low HBM capacity creates bottlenecks, because each GPU has to pause its workloads while it waits to receive more data, leading to a poor user experience when running AI chatbots or AI agents.

Micron's HBM3E data center chip offers 50% more capacity and consumes 30% less energy than anything else in the industry, which is why Nvidia and Advanced Micro Devices have paired it with their current generation of GPUs. But Micron's new HBM4 is now in production, and it offers yet another leap in capacity and energy efficiency. It will power new GPU platforms like Nvidia's Vera Rubin, which is expected to lead the industry in performance when it ships later this year.

Data center HBM was a $35 billion market last year, and Micron predicts it will almost triple in size to $100 billion by 2028. Demand is so strong that the company's entire 2026 supply is already sold out.

Explosive revenue and earnings growth

Micron's revenue growth is accelerating, driven by the momentum in its AI-related memory sales. The company generated a record $23.8 billion in total revenue during its fiscal 2026 second quarter (ended Feb. 26), which was up by 196% compared to the year-ago period.

Data source: Micron Technology.

Micron's fiscal 2026 third quarter, which concludes at the end of May, is likely to be another blockbuster. Management is forecasting revenue of $33.5 billion, which would see growth accelerate even further to 260%.

A company's stock price is often driven by its bottom line, and Micron is producing explosive growth there, too. The company earned $12.07 per share during the second quarter, which was up 756% year over year, and management is forecasting earnings of $18.90 per share for the third quarter, representing even faster growth of 1,025%.

Micron stock is still cheap, but there's a catch

Based on trailing-12-month earnings of $21.18 per share, its stock is trading at a price-to-earnings ratio (P/E) of 37.4. That is a premium to both the S&P 500 and the Nasdaq-100 indexes, which trade at P/E ratios of 26.4 and 35.6, respectively.

However, Wall Street thinks the company can grow its earnings to $101.78 per share in fiscal 2027 (according to Yahoo! Finance), placing its stock at a forward P/E of just 7.8. That implies shares will have to surge by another 380% over the next 18 months or so just to maintain the current P/E of 37.4.

But here's the catch: Micron has an incredible amount of pricing power for its memory hardware right now because of the extreme supply-demand imbalance across the industry, which is significantly boosting its profit margins. But the company and its competitors will eventually add enough capacity to meet demand, at which point memory prices will normalize, making it very difficult for the company to match its current level of earnings -- let alone grow them.

Wall Street knows that shift is coming, which explains why Micron's forward P/E is so low. Therefore, I would be cautious about piling into its stock right now. Investors who do want to buy it at the current level should consider using a small position size to minimize risk, and they should also maintain a long-term time horizon of three to five years to increase their chances of earning a positive return.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.