Prediction: $950 Invested in Micron Today Will Be Worth This Much by 2030

Micron Technology (NASDAQ: MU) has produced phenomenal results for investors amid the artificial intelligence (AI) boom. The stock has climbed around 500% over the past year, driven by incredible earnings growth. A surge in demand for memory chips has sent prices through the roof, while Micron and its competitors have taken a cautious approach to expanding supply capacity.

With expectations for semiconductor spending to keep climbing through the end of the decade, investors may be wondering if Micron still has significant upside from here. You can buy a share of the stock for about $950 today. Here's my prediction for how much that share will be worth by 2030.

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How long will the AI supercycle last?

The memory market remains in a severe shortage, and Micron's management expects this to last through 2027. Rival SK Hynix (NASDAQ: SKHY) thinks the shortage could last through 2030. There are already signs, however, that the market is approaching equilibrium.

Price increases are slowing down. That's a result of some customers no longer being able to support higher memory chip pricing and of Micron and its competitors' moves to sign long-term agreements that lock in pricing bands. It's worth noting that if SK Hynix were confident that the market would remain supply-constrained and could support higher pricing through 2030, it wouldn't sign five-year contracts capping pricing at today's rates.

Tech industry analyst company TrendForce expects the price of dynamic random access memory to increase just 13% to 18% sequentially in the third quarter, ending this month. That's down from 53% to 58% growth in the second quarter.

As more supply comes to market, prices will come down, and Micron and other memory chipmakers may be able to offset lower prices with volume. However, the cyclical nature of the market should result in a drop in revenue at some point, even if demand and volume continue to climb. Analysts expect revenue to peak in 2028, followed by a sharp decline in 2029 and 2030.

Micron's earnings will take an even bigger hit in a cyclical downturn than revenue, as its additional supply capacity will increase operating expenses. In Micron's last cyclical downturn, revenue fell about 50% from its peak, but net income turned severely negative. That's the big reason Micron stock trades for just 6 times analysts' earnings expectations for next year. Its current earnings simply aren't sustainable.

How much will Micron be worth in 2030?

Micron's stock price tends to move in the same direction as its net income but not to the same extent. Instead, its P/E ratio shrinks as net income climbs and expands as net income falls. Still, the change in net income is not fully muted. That's to say, there will likely be a sell-off when it becomes evident that earnings are about to or have already reached their peak.

It typically takes about two years for Micron earnings to reach a trough. If that pattern plays out again, Micron will hit the bottom of the next down cycle in 2030, based on current analyst expectations. The good news for investors is that the stock typically recovers quickly once it becomes evident that Micron has started another earnings cycle. The market pushes the stock higher on expectations of strong earnings growth, and it often recovers its previous high from the last earnings peak.

So why would anyone hold Micron stock through a down cycle? If they believe the down cycle will be shorter or less severe than usual, they can experience strong gains in the long run, despite the potential for near-term losses. But my base case is that Micron will be worth about as much in 2030 as it is at its peak in 2028.

It's worth noting that the stock price doesn't always recover so quickly. After the internet boom of the 1990s, Micron took over 20 years to recover to its all-time high.

So how much will Micron stock be worth in 2028? Its share price typically peaks between 7 and 15 times trailing earnings, but it peaks before earnings do. Analysts currently expect relatively flat earnings between 2027 and 2028, which should push the earnings multiple toward the low end. At 9 times 2027 earnings expectations, the stock price could peak around $1,600. Of course, there's a wide range of potential outcomes, and history doesn't always repeat itself.

Still, I wouldn't expect the stock to trade higher than that unless management gives analysts a reason to believe the earnings cycle will push net profits even higher and last longer than anticipated. As earnings peak, the stock typically falls to between 3 and 8 times trailing earnings, which would push the price down toward $1,000 at a 6-times-earnings multiple of analysts' 2028 expectations, which seems like a more reasonable price for the stock.

In other words, Micron may be able to deliver solid long-term gains through 2030 at the current price, but the path will likely entail a good amount of volatility and comes with a high degree of uncertainty. There may be much better opportunities to buy the stock in the future.

Adam Levy 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.