Micron Stock Has Soared by More Than 12X. Can It Double Again?

Micron (NASDAQ: MU) stock has delivered extraordinary returns over the past year and a half. After a rally of more than 1,200% since the start of 2025, many investors will naturally assume the easy money has already been made on this stock. That may prove true.

But investors should remember something important: A stock does not become a bad investment simply because it has gone up sharply in price. The more relevant question is not about how much Micron stock has risen. It's about whether Micron can keep growing its profits. If the answer is yes, the stock could still have room to run.

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The stock doesn't need to get more expensive

Many investors assume a stock can only rise significantly if investors become even more excited about it. That isn't always the case.

Imagine a company earns $10 billion in annual profits and investors value the business at $200 billion. That would give it a price-to-earnings ratio of 20. If profits eventually rise to $20 billion and the market keeps putting that same valuation on the company, its market cap would rise to $400 billion.

That hypothetical stock would have doubled even though investors had not become any more optimistic about the business. Rather, the business would have become more valuable because its profits rose.

Therein lies the basic bull case for Micron. If the company can continue to grow its profits, the stock can keep rising even if the valuation remains unchanged.

The bull case for why profits could continue to grow

Micron sits at the center of one of the largest technology spending booms in decades.

Companies around the world are investing heavily in artificial intelligence infrastructure. The data centers they are building and equipping need capacious quantities of advanced memory to effectively handle the workloads involved in training and running increasingly powerful AI models. That surging demand has left the entire memory industry short on supply, which has helped Micron and its peers grow revenue and profits.

In the latest quarter, Micron's revenue more than quadrupled year over year from $9.3 billion to $41.5 billion, while operating profit surged more than tenfold from $2.2 billion to $33.3 billion.

At the same time, Micron is selling more of its most advanced memory products -- such as high-bandwidth memory -- for AI applications. That will help the company generate even greater profits from each dollar of revenue.

If AI infrastructure spending remains strong and data center clients continue buying premium memory products, Micron could sustain its current levels of profitability or keep growing its earnings over the next several years.

That possibility helps explain why some investors believe the stock can continue climbing even with a massive rally in behind it.

The real question investors should focus on

While higher profits are desirable, the key question is not whether Micron can grow profits next quarter, but whether it can keep its profit margins high over the long term -- say, for the next five to 10 years.

That distinction matters. Many companies experience a few great years. But far fewer companies maintain strong profits for a decade or longer.

If Micron can continue earning more money year after year, the stock could still deliver attractive returns, even after its recent rally. On the other hand, if today's high margins prove temporary, the outcome will look very different.

What could go wrong?

This is where investors need to be careful.

The memory industry has a long history of boom-and-bust cycles. Periods of strong demand often lead to strong profits. Strong profits encourage memory makers to expand their production capacity. But with multiple competitors following the same playbook at the same time, this has repeatedly led to the industry building capacity in excess of demand. When supply eventually catches up, their pricing power dissipates, and profits slide.

Micron has experienced this pattern over and over again across the decades. So the risk is not that the demand from the AI build-out will suddenly disappear. The risk is that the current situation represents an unusually good phase for sellers in a still-cyclical market rather than a new normal.

If Micron and its competitors increase production (which they are doing) and memory supply catches up with demand, Micron could face pressure on both pricing and profits.

What does it mean for investors?

Can Micron stock double again? I think there's a good chance it can.

But investors should focus less on the stock price and more on the company's ability to keep growing profits. If Micron continues to benefit from AI spending and successfully expands its higher-margin memory business, earnings could continue to move higher. And if earnings keep growing, the stock could follow.

In other words, the most important question isn't whether Micron stock has already risen too much. It's whether the company can keep making more money, and for how long.

Those answers will likely determine where the stock will head next.

Lawrence Nga 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.