Move Over, Nvidia: 1 AI Stock Just Posted Its Best Day Since 2011 -- and Wall Street Says It's Still Cheap.

Micron Technology shares jumped more than 19% on Tuesday, the memory-chip maker's biggest single-session gain since 2011, and the move pushed the company past $1 trillion in market value for the first time -- making it one of the 10 most valuable public companies in the U.S., as of this writing. The catalyst for the stock's big surge this week was a sharply higher price target from a major Wall Street firm. And this was followed by several other analysts raising their targets significantly. The first analyst -- the one who caused shares to soar -- tripled its firm's target for the stock from $535 to $1,625. In the following days, two additional targets that were revised to particularly high levels came in at $1,500 and $1,750.

Behind all of this, though, there really is a bull case building: artificial intelligence (AI) has reshaped the memory business in ways that could prove lasting rather than temporary.

After its recent surge, Micron is now up an extraordinary 240% year to date and more than 900% over the past year.

Even so, weighed against its own earnings power, the stock may not be as expensive as a trillion-dollar market capitalization implies.

Image source: Getty Images.

A tighter memory market

For most of its history, Micron sold a commodity: memory chips whose prices swung with supply and demand, lifting profits in good years and erasing them in bad ones. AI, however, appears to have changed that -- at least for now. The company has committed its entire 2026 output of high-bandwidth memory (the stacked chips packaged alongside AI accelerators in data centers) under long-term contracts with set pricing. And on its latest earnings call, it said it had signed its first five-year customer agreement. Demand now runs well ahead of the industry's capacity, and Micron expects supply to stay tight beyond 2026. Rival SK Hynix, a key supplier to Nvidia, has likewise sold out its 2026 high-bandwidth memory capacity.

This tight supply environment, which is driving a surge in prices and soaring margins, is evident in the company's latest financial results.

Micron's fiscal second-quarter revenue (the period ended Feb. 26, 2026) rose 196% from a year earlier to $23.86 billion, after climbing 57% in the prior quarter.

Finally, Micron's profit has climbed faster still, with non-GAAP (adjusted) earnings per share soaring 682% from a year earlier.

And the company's guidance is staggering, too. For the current fiscal third quarter, management guided to a record $33.5 billion, which would work out to about 260% growth.

Is the stock still cheap?

Micron stock trades at about 45 times earnings, as of this writing. So, shares aren't the bargain they were.

With that said, valuing the stock based on trailing earnings can make it look more expensive, relative to its true earnings power (now that it has been reset significantly higher), than it really is. Since profits have climbed so sharply recently, a better way to value the stock is based on expected earnings; annualize the company's own guidance for fiscal third-quarter earnings of $19.15 a share, and the stock trades at just 13 times that earnings level -- quite a different story.

For a business growing this fast, that's a modest valuation multiple.

With all of this said, the risk is just as undeniable as Micron's recent growth.

Almost all of Micron's recent growth has come from higher prices rather than higher volumes. From the prior quarter, the company shipped only modestly more memory but charged far more for it, with prices on its mainstay chips up by about two-thirds. But pricing like that holds only as long as supply stays scarce. Yet Micron is spending heavily to add capacity -- more than $25 billion this fiscal year on new plants and equipment, with more to come in 2027 -- and much of that supply, along with rivals', is due to arrive in 2027 and 2028. If production from these investments lands just as AI infrastructure spending cools, the forces lifting prices today could reverse.

For investors who believe the AI build-out has years to run, Micron could still be a reasonable buy here, with strong cash flow today and products central to AI data centers. But if you zoom out far enough, Micron arguably remains a cyclical, capital-hungry business -- and the stock's low forward earnings multiple is partly a reminder that the market has seen memory booms end before. Anyone buying at this level, therefore, may want to consider keeping the position sized for that risk.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.