Micron Is Down 17% Over the Past Month. Is This AI Stock Still a Buy?

Micron Technology (NASDAQ: MU) has been a top AI stock for years, as its memory chips have become some of the most in-demand components in artificial intelligence (AI) data center infrastructure.

But lately, investors have been worried that AI companies are spending too much money on their build-outs and that rising costs are impeding company growth. That's put pressure on Micron's stock, pushing it down about 17% over the past month.

While they're not wrong to be skeptical, some recent quarterly results from Microsoft, Alphabet, and Amazon indicate that AI spending is paying off, and likely won't slow down any time soon. Here's why Micron stock is still a buy despite the risks.

Image source: The Motley Fool.

Why the AI trade is stumbling right now

Investor sentiment toward AI-focused companies began to shift a few months ago. There isn't one singular reason behind it, but rather a combination of rising interest rates, fears about overspending on AI, public sentiment toward data centers, and concerns about AI regulation.

All these concerns are valid and could negatively affect AI infrastructure in the coming years. For example, if the Federal Reserve continues raising interest rates to help tamp down inflation, it could push up borrowing costs for tech companies. That could stifle some AI infrastructure investments and potentially weigh down Micron's sales.

What's more, some investors worry about the potential for other memory players, such as ChangXin Memory Technologies, or CXMT, in China to take some of Micron's market share. CXMT recently said it may soon sell server memory processors, which could lead to pricing pressure on Micron's memory and a loss of market share.

Still, it's unclear whether CXMT will be able to scale its production, or even if its technology can truly compete with Micron and its peers. Given that Micron's management has said that memory demand still vastly outstrips supply, it's unlikely that it would affect Micron all that much.

Why Micron stock is still a buy

Despite recent concerns, I think Micron is still a buy, given the company's solid growth in its most recent quarter and its long-term prospects driven by continued AI investments from leading tech companies.

In the company's fourth quarter (which ended Sept. 30), Micron reported a 380% jump in revenue to $54.2 billion, and non-GAAP earnings going more than 10X higher, to $33.42 per share. Micron's management said on the earnings call that memory demand continues to outpace available supply and that 2027 is shaping up to have "stronger demand" than the company previously expected.

The need for more memory processors led the company's leadership to issue revenue guidance of about $61.5 billion for first-quarter 2027 at the midpoint, representing a 350% increase over the same period last year.

It's not just the company's current momentum that makes it worth considering buying. The recent quarterly results of some leading tech companies show that their investments in AI infrastructure are paying off. Take a look:

• Alphabet's Google Cloud services revenue rose 82% to $24.8 billion in the second quarter.
• Microsoft's Azure fiscal 2026 cloud sales surpassed $100 billion annually for the first time.
• Amazon Web Services recently achieved $169 billion in annualized revenue.

The revenue growth of these companies is directly tied to AI and shows that while spending is accelerating, so are their revenues. As these companies continue to invest more in data center infrastructure, Micron memory sales will continue to rise because it has active memory deals with all the companies listed above.

Despite some recent investor concerns, AI investments aren't likely to slow down any time soon. S&P Global estimates that tech companies will spend $1.3 trillion on AI infrastructure next year.

Keep in mind that if you buy Micron stock now, there's likely to be some wobbliness in the AI trade in the short term. Investors are still trying to figure out which direction the economy is headed, and there will likely be persistent fears about an AI bubble, even though the latest data show that AI spending has been worth the cost for key players.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Micron Technology, Microsoft, and S&P Global. The Motley Fool has a disclosure policy.