Hedge Fund Heavyweights Are Dumping Micron (MU). Except One Billionaire.

Hedge funds have been selling off Micron Technology (MU) since the second quarter of 2026, even as the stock price soared due to AI-related demand. Billionaire investor David Tepper's firm, Appaloosa Management, reduced its stake by 41%, while Citadel Advisors, Renaissance Technologies, Two Sigma Investments, and Bridgewater Associates also trimmed their holdings.

However, Coatue Management, led by billionaire Philippe Laffont, significantly increased its position in Micron, up by 1,794% to a $3.63 billion stake. Currently, roughly half of Micron's revenue comes from data centers, and management anticipates that DRAM and NAND supply constraints will persist beyond 2028.

The primary reason for the hedge funds' selling is that the stock has experienced excessive gains, prompting them to take profits and allocate funds to alternative investments. A potential downside scenario for Micron involves a reduction in average selling prices if memory supply catches up to demand, which could negatively impact the company's margins.

Micron's management noted that the production cost per unit of storage for its new mobile, server, and HBM products is increasing, which may lead to a rise in blended DRAM cost-per-bit. Additionally, Coatue Management has reported a surge in CXMT, a Chinese memory maker, which has grown its market share to approximately 5.5% in 2026, up from virtually zero in the previous year.

CXMT is anticipated to continue expanding and may eventually rival Micron in DRAM wafer capacity by 2029. Despite Micron's market share in DRAM growing modestly from 19% in 2016 to 22.4% in 2026, it still lags behind industry giants Samsung and SK Hynix. Micron's trailing non-GAAP P/E stands at 21.54, which is 19% below the sector median of 26.64, and its forward non-GAAP P/E is at 13.24, representing a 46% discount to the sector median of 24.51.

Conversely, Micron's GAAP forward P/E is 13.38, a 57% discount to the sector median of 31.23. However, the trailing EV/Sales ratio is 11.89, more than double the sector median of 4.01, and the trailing Price/Sales ratio is 12.11, nearly double the sector median of 3.86. While acknowledging the potential risks, the writer maintains that some AI stocks offer greater promise for higher returns within a shorter timeframe than Micron.