Should You Buy Micron Stock in October?

If you bought $10,000 worth of Micron Technology (NASDAQ: MU) stock in October five years ago, you would have over 148,300% today. This life-changing return of over 138,000% was driven by the company's rapidly rising revenue and profits amid insatiable demand for artificial intelligence (AI) infrastructure.

That said, strong past performance doesn't necessarily guarantee similar results in the future. So let's dig deeper into the pros and cons of Micron to decide if the memory giant is still a compelling long-term buy.

A fundamentals-driven rally

Micron's stock price growth has been driven by incredible operating results. Just take the company's fiscal fourth-quarter earnings as an example. Revenue soared by a blistering 379% year over year to $54.2 billion, driven by high sales to data center and cloud computing clients.

As AI accelerators become more powerful, memory has emerged as one of the biggest bottlenecks in running and training advanced models. This has led to soaring demand for specialty products like high-bandwidth memory (HBM), which is distinct from conventional DRAM because of its significantly higher performance. These chips are typically paired with graphics processing units (GPUs) and other AI accelerators, and move massive amounts of data quickly and efficiently within a data center.

As companies like Micron commit more and more of their production capacity to HBM, it is leading to shortages throughout the memory market. This trend is exemplified by the company's Mobile and Client segment, which supplies lower-end chips for things like smartphones and laptops. This once-mature business saw its Q4 growth skyrocket 248% year over year to $13.1 billion, mainly because clients are willing to pay more for these products than they were in the past.

Higher-margin sales helped drive fiscal 2026 net income to $86.8 million, an eye-popping 816% jump compared to the prior year.

What is the catch?

If something looks too good to be true, it probably is. And Micron's spectacular growth coupled with its low valuation of just 7 times forward earnings should be setting off some alarm bells for investors. Clearly, many people on Wall Street don't expect the boom to last very long.

The biggest warning comes from history. The memory industry has a long track record of boom and bust cycles, including the PC boom during the 90s and the smartphone boom during the late 2010s. These booms typically start with demand outstripping supply and end with a market glut as production capacity catches up. Bulls will argue that this time will be different because of long-term purchasing contracts and the sheer importance of the new AI industry, but I wouldn't bet on it.

Over the next few years, a massive amount of HBM supply is expected to hit the market. Micron itself plans to pour $250 billion into U.S. manufacturing capacity through 2035. Not only will this dramatically increase the amount of memory available, but it will also soak up a lot of the company's cash flow that could have otherwise gone to dividends and buybacks. China is another long-term threat, as new entrants like CXMT plan to scale up their production over the next few years.

Image source: Getty Images.

Who should buy Micron stock?

Whether or not you believe Micron stock is a good buy in October depends on what you expect to happen in the AI industry. If you think the AI boom is just getting started and that current levels of data center spending will continue to rise, the stock will look like a great buy because its low valuation reflects a slowdown you don't believe will happen.

However, based on historical patterns in the memory industry and Micron's own huge investments into production capacity, the risk of a future glut seems to outweigh the potential rewards right now. And the stock will probably continue trading sideways until more information becomes available.

Will Ebiefung 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.