The High-Bandwidth Memory (HBM) Bottleneck Can Still Cause Micron's Stock to Soar

Over the past few months, there have been few better investment options than Micron (NASDAQ: MU). Its stock was soaring because memory chips were in a huge bottleneck, which caused memory prices to skyrocket. This even expanded onto the consumer side, and normally, cheap PC memory saw its prices skyrocket practically overnight.

Over the past year, the company's stock has been up around 300%, but it sold off recently. The stock was down more than 20% from its all-time high, and there are a few factors to blame for its recent weakness.

However, I think right now is the perfect time to buy the stock, as these catalysts aren't a huge deal for the long-term production bottleneck.

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Google's new algorithm has cratered Micron's stock price

One of the primary leaders in generative artificial intelligence is Alphabet's Google. Google has made several huge strides in artificial intelligence (AI) and is one of the leaders in this space despite being counted out about a year ago.

The company recently unveiled a new algorithm, known as TurboQuant. While getting into the details about this algorithm would be boring to most, the bottom line is that the algorithm reduces the memory size needed by six times. The market took that figure and immediately assumed we'd need six times fewer memory chips, but that's far from the case.

The reality is that with this innovation, AI hyperscalers can use memory for other purposes. Just because they can use six times less doesn't mean we need six times less. Instead, they will find other uses for that memory capacity, such as improving on an AI module's ability to recall specific inputs much later. Google refers to this as finding a needle-in-a-haystack task, and it is important for a properly functioning AI model.

Google also didn't lock this algorithm behind a paywall or in its ecosystem. It's an open-source algorithm that everyone can utilize, so the benefit of this will be felt over the entire industry. Still, I don't think this will alleviate the memory bottleneck, as there is still demand that cannot be met.

Micron sees the high-bandwidth memory market expanding massively

In 2025, Micron estimated the high-bandwidth memory (HBM) market was worth about $35 billion. By 2028, that is expected to triple to $100 billion.

That's huge growth, but Micron is even struggling to meet demand right now. During its most recent quarterly call, Micron's management informed investors that the company can only meet about half to two-thirds of its orders. Although the TurboQuant breakthrough may provide a temporary relief on memory orders, the issue isn't going away.

I think the AI hyperscalers are still going to be buying as much memory as they projected they would before this breakthrough, making Micron's stock a great buying opportunity at the sale price. Next quarter, they expect $33.5 billion in revenue, up from $23.9 billion this past quarter, and up from $13.6 billion the quarter before that.

Micron is on an exponential growth trajectory, and with HBM demand expected to expand through 2028 and the company not even coming close to meeting memory demand now, it's safe to say that memory chip prices will stay elevated for the foreseeable future.

With Micron's stock recently trading for a dirt cheap 6.2 times forward earnings, I think this is an excellent way to invest in the AI space without having to buy some of the names that have thrived over the past three years. Few stocks have the combination of growth and valuation that Micron does, and with the rest of the market in a holding pattern, I think this is an excellent stock to scoop up before it rockets higher throughout the rest of 2026.

Keithen Drury has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Micron Technology. The Motley Fool has a disclosure policy.