Should You Buy Micron Stock While It's Under $500?

Most artificial intelligence (AI) development happens inside centralized data centers, where thousands of specialized chips, called graphics processing units (GPUs), deliver the necessary computing power. Nvidia and Advanced Micro Devices are two of the world's top GPU suppliers.

Micron Technology (NASDAQ: MU) provides those chipmakers with a very important component called high-bandwidth memory (HBM), which helps unlock maximum processing speeds from each GPU by facilitating the seamless flow of data. The company is experiencing astronomical demand for its HBM solutions right now, which triggered a near-threefold increase in its revenue during the fiscal 2026 second quarter (ended Feb. 26).

Micron stock is up by an eye-popping 330% over the last 12 months alone, and it was trading at $444.27 as of the market close on March 19. However, its attractive valuation suggests it could soon rocket past $500, so should investors take this opportunity to buy?

Image source: Getty Images.

Memory is critical in AI workloads

HBM sits alongside GPUs and other components in the AI data center hardware stack. It stores information until GPUs are ready to process it, so capacity is critical. A low HBM capacity creates bottlenecks, forcing GPUs to pause workloads while they wait to receive more data. This would create a horrible user experience for anyone trying to run AI chatbots or AI agents.

Micron's HBM3E solution for the data center offers 50% more capacity than the competition while consuming 30% less energy, so it's perfect for AI companies seeking the fastest processing speeds at the lowest cost. But Micron is upping the ante with its new HBM4 solution, which offers a further 60% increase in capacity compared to HBM3E, along with a 20% improvement in energy efficiency.

Nvidia is using Micron's HBM4 in its latest Vera Rubin GPUs, which currently lead the industry in terms of AI processing performance.

But Micron's AI opportunity transcends the data center, because it's also a top supplier of memory solutions for personal computers (PCs) and smartphones. The company says PCs with agentic AI capabilities require up to 32 gigabytes of dynamic random access memory, which is twice as much as the average PC. Similarly, around 80% of flagship smartphones from top manufacturers are shipping with at least 12 gigabytes of memory, compared to just 20% of smartphones one year ago. More memory means more revenue for Micron.

Micron's revenue and earnings are soaring

Micron generated a record $23.8 billion in total revenue during its fiscal 2026 second quarter, up 196% from the year-ago period. The result exceeded management's forecast of $18.7 billion by a wide margin.

Micron's cloud memory business (where it accounts for HBM sales) contributed $7.7 billion in revenue, up by 163% year over year. The company's mobile and client segment (where it accounts for PC and smartphone memory sales) also generated $7.7 billion in revenue, but that was up by an even greater 245%.

The soaring demand for AI-related memory solutions has given Micron an incredible amount of pricing power. As a result, its generally accepted accounting principles (GAAP) earnings rocketed higher by 756% during the second quarter, coming in at $12.07 per share. Earnings typically drive stock prices, so this number could play a key role in shareholder returns from here. But more on that in a moment.

Micron provided some extremely bullish guidance for the current fiscal 2026 third quarter, which will conclude at the end of May. The company expects to deliver a whopping $33.5 billion in revenue along with earnings of $18.90 per share, representing staggering year-over-year increases of 260% and 1,025%, respectively.

Micron stock still looks cheap

Based on Micron's trailing-12-month earnings of $21.18 per share and its stock price of $444.27, its price-to-earnings (P/E) ratio is just 20.9. That means that despite more than quadrupling over the past year, Micron stock is still cheaper than the S&P 500 index, which trades at a P/E ratio of 24.1, and the Nasdaq-100 index, which trades at a P/E ratio of 30.3.

Micron is also substantially cheaper than Nvidia, which has a P/E ratio of 36.4. The stark valuation gap doesn't make much sense, in my opinion, because Nvidia is using Micron's HBM -- therefore, investors who believe Nvidia will continue selling truckloads of GPUs should be equally bullish on Micron.

Looking ahead, Wall Street's consensus estimates (provided by Yahoo! Finance) suggest Micron could deliver earnings of $36.67 per share during fiscal 2026, followed by $57.31 per share in fiscal 2027. That places its stock at forward P/E ratios of 12.1 and 7.7, respectively.

In other words, Micron stock would have to climb by 171% over the next 18 months just to maintain its current P/E ratio of 20.9, without even factoring in the potential for an even higher valuation. That would translate to a stock price of $1,203, so surpassing $500 might be a mere formality.

However, it's important to remember the AI semiconductor cycle is far from normal. In the past, data center operators would build infrastructure and use it for several years before upgrading it. The capital investment cycle has been reduced to one year (and even less in some cases) because companies like Nvidia are launching new GPUs so quickly.

But even the wealthiest tech giants won't be able to maintain the current pace of infrastructure spending forever, which is something Wall Street is likely factoring into Micron's valuation. Nevertheless, I think $500 will be an easy hurdle to clear from here.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.