Here Is What a $5,000 Investment in Micron Could Be Worth by 2028

Micron (NASDAQ: MU) is undergoing one of the biggest shifts of nearly any stock in the market. It's seeing unprecedented demand for its memory chips and is also helping to transform its industry at the same time. The moves it's making are upending some of the long-established understandings regarding its business, but the market hasn't caught up to those changes yet.

I think this could be one of the greatest investment opportunities out there right now, as I could easily see a $5,000 investment made in Micron now growing into a $25,000 position by 2028.

Image source: The Motley Fool.

The memory chip industry is shifting

Micron makes memory chips, and that has historically been an extremely cyclical industry. There's little to differentiate one memory chip brand from another, so the chips have practically become commodities. Pricing is dictated almost entirely by supply-and-demand dynamics, and right now, demand from AI data centers has eaten up all available supply. The resulting deep shortage has caused memory chip prices to soar.

So Micron is enjoying monster growth, with revenue skyrocketing nearly 380% year over year in its most recent quarter. However, it isn't just sitting around enjoying the gains. It's using this opportunity to reshape its business model.

While it's great to sell any commodity during a supply crunch, the opposite is true when there's a glut, and when this AI demand wave is over, a glut can be expected. As a result, Micron is taking steps to secure its business strength for the longer term. It has entered into numerous multiyear take-or-pay agreements with large customers, and as of the end of Q3, it had locked in about 35% of revenue through 2030. These agreements have price floors and ceilings for its memory chips, which gives Micron much greater visibility into its finances over the next few years than it has previously enjoyed.

This could have only occurred with a major supply crunch, as it gave Micron bargaining power with its clients, and drove the customers to seek more certainty about their memory chip supplies. As more of these contracts come into play, it should reduce the cyclicality of the memory chip industry, which will be a great thing for Micron shareholders. However, the market hasn't started pricing that change into the stock yet, and this mismatch has created a golden opportunity for investors.

Micron's stock is dirt cheap

Because the market remains convinced that the next down phase of the memory cycle will eventually hit, Micron's stock is priced at a major discount. It trades for a mere 5.3 times earnings estimates for fiscal 2027 (which ends in August 2027).

MU PE Ratio (Forward) data by YCharts.

That's the market flat-out telling investors that it doesn't believe in Micron's long-term growth story. However, the market just isn't listening to the memory makers. Micron management told investors that conditions in the memory chip market will be tighter in 2027 and 2028 than they are in 2026. As a result, prices will continue to rise. Micron is also building new production facilities, which are expected to come online in mid-2027 and late 2028. That will boost its capacity during a supply crunch, leading to even more revenue growth.

That will be a huge catalyst that isn't accounted for right now in 2028's projected growth rates. (Wall Street only projects 16% growth for 2028 right now.) I think it's more accurate to pencil in a bit more aggressive revenue growth, like 30%, although I still think that's a major undershoot.

For fiscal 2027, Wall Street thinks Micron will generate $176.55 in earnings per share (EPS). If earnings grow by 30% in fiscal 2028, that would lift EPS to nearly $230. If the market adjusts to the idea that Micron isn't as cyclical as it once was, it may price it at 20 times earnings. That valuation with $230 in EPS would give it a stock price of $4,590.

From today's $920 share price, that suggests the stock could increase fivefold, turning a $5,000 investment into about $25,000. That makes Micron a top AI stock to buy now.

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