This Artificial Intelligence (AI) Stock Hit $1 Trillion in Record Time. Wall Street Says This Will Happen Next.

In May, Micron Technology (NASDAQ: MU) became the 12th U.S. company to achieve a $1 trillion market value, and the memory-chip maker reached the milestone in record time. After hitting $500 billion earlier this year, Micron soared to $1 trillion in just 48 days.

Before this year, Tesla held the record at 230 days. And it took Nvidia nearly 500 days. But an unprecedented memory chip supply shortage pushed Micron over the line rapidly this year, alongside two other chipmakers: Samsung and SK Hynix doubled from $500 billion to $1 trillion in 82 days and 61 days, respectively.

However, most Wall Street analysts think Micron is headed lower. The median target price of $840 per share implies 15% downside from the current share price of $990. But investors shouldn't necessarily count that against the stock. Micron beat Wall Street's earnings forecasts in the past six quarters, meaning analysts tend to underestimate the company.

Here are the important details.

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How Micron's memory chips fit into the AI revolution

Most investors have heard of central processing units (CPUs) and graphics processing units (GPUs). CPUs are the brains that actually run applications and operating systems, while GPUs are the muscle that accelerate demanding workloads like artificial intelligence. But I suspect fewer investors know how memory chips fit into the equation.

CPUs and GPUs require memory. "CPUs store information in NAND, or long-term memory, and use DRAM, or working memory, to perform tasks," according to Meera Pandit, strategist at J.P. Morgan. Meanwhile, high-bandwidth memory (HBM) is a special type of DRAM that's essential to AI because it feeds data to GPUs at very high speeds.

Micron develops and manufacturers memory and storage solutions based on NAND flash and DRAM chips. In terms of market share, the company is tied with Sandisk for fourth place in NAND, it ranks third in DRAM, and it's tied with SK Hynix for second place in HBM, according to Counterpoint Research.

The driving force behind Micron's success is a supply shortage

Micron crushed Wall Street's estimates in the second quarter of fiscal 2026, which ended in February. Revenue rose 196% to $23.8 billion and non-GAAP net income increased 682% to $12.20 per diluted share. However, the driving force behind those numbers was price increases (not a durable competitive moat) driven by a severe supply shortage.

In the past year, NAND prices have tripled and DRAM prices have quadrupled, but the good times will not last forever. Major memory chip manufacturers, including market leaders Samsung and SK Hynix, are building new fabrication plants to boost production capacity. Those facilities could move the supply needle as early as next year.

In the meantime, demand for AI infrastructure should keep memory prices elevated, which should translate into strong financial results from Micron for at least another year or two. But supply will almost certainly overtake demand within three years, at which point prices could crater. Memory chips have historically been the most cyclical of the semiconductor markets.

Micron stock looks expensive at its current valuation

Wall Street expects the current memory chip cycle to peak in 2028. Micron's adjusted earnings are projected to increase at 92% annually during that period. But analysts expect the company's adjusted earnings to drop 70% in 2029 as excess memory chip supply saps its pricing power.

Putting those projections together, we find that Micron's adjusted earnings are forecast to grow at 13% annually through 2029. That makes the current valuation of 45 times earnings look rather expensive. I think investors can own a small position in Micron stock today, so long as they understand earnings could drop sharply after the memory chip cycle peaks.

JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has positions in Nvidia and Tesla. The Motley Fool has positions in and recommends JPMorgan Chase, Micron Technology, Nvidia, and Tesla. The Motley Fool has a disclosure policy.