What's Wrong With Micron Technology Stock?

Micron Technology (NASDAQ: MU) stock is in free fall. Although it's still up big this year with gains of around 180%, it has declined by around 20% in just the past month. And it's down around 35% from the high of $1,255 it reached earlier this year.

With a shortage still ongoing in memory and storage products, and the company achieving significant growth of late, Micron's recent decline has seemingly come out of nowhere. What's wrong with the stock, and has this pullback unlocked a great buying opportunity for investors?

Image source: Getty Images.

The memory shortage isn't ending anytime soon, and may get worse next year

As tech companies have been investing heavily in artificial intelligence (AI) and upgrading their infrastructure, there's been a growing need for more memory and storage products. The result has been a massive supply shortfall, enabling companies such as Micron to raise prices, capitalize on demand, and generate massive profits along the way.

There are concerns that the shortage may persist until the end of the decade, when more supply may finally be available to better meet demand. In the short term, including next year, however, things may get even worse, with Samsung recently warning investors that conditions aren't improving. Executive Vice President Jaejune Kim said, "We believe it will be unlikely to see any increase in incremental supply through 2028. The supply constraints are expected to become even more severe in 2027."

Is Micron's stock worth buying today?

Micron's stock crossed a $1 trillion valuation earlier this year. It's dipped below that amid its recent decline, but its gains remain massive, with Micron rising nearly 900% in just five years. The trouble with such fast-growing businesses is that it's hard to gauge what they are really worth and what the new normal will be.

If growth slows drastically and profits come crashing down as more supply becomes available, Micron and other memory stocks may be due for a big reckoning. Many investors may already be anticipating that and selling these types of stocks (Micron isn't alone in its decline of late), especially given how significantly they've risen in recent years.

Amid the sell-off, I think Micron stock might make for an intriguing buy, simply because it doesn't seem as though the situation in the memory and storage markets will improve anytime soon. While the stock is highly volatile, I wouldn't be surprised if it rallies again, given that its results are likely to remain strong.

David Jagielski, CPA 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.