Is Micron Stock a Buy Right Now?

Micron Technology (MU) has experienced a significant drop of over 34% in its stock price, following a surge driven by the artificial intelligence (AI) boom. This decline stems from worries about a potential slowdown in AI spending, which has rattled the technology sector. Despite this substantial decline, Micron's stock may present a favorable opportunity for long-term investors.

The company manufactures dynamic random-access memory (DRAM), NAND flash storage, and high bandwidth memory (HBM), which are crucial components for AI processors. Competing with SK Hynix and Samsung, Micron faces a market where demand for memory chips exceeds supply. In fact, SK Hynix recently reported that its DRAM and HBM production is at full capacity until 2029.

Micron's CFO acknowledges that memory shortages could continue through 2030 due to the lengthy time required to build new manufacturing capacity. During its recent earnings call, Micron's CEO revealed that a significant portion of HBM production for 2027 is already sold out, with prices substantially higher than those negotiated for 2026.

The shortage extends beyond specialized AI memory, as HBM manufacturing demands more production capacity than conventional DRAM. This situation leaves less capacity available for memory used in computers, smartphones, and conventional servers, presenting an opportunity for Micron to raise prices across its product range. Micron's recent financial performance is noteworthy, with revenue increasing by 379% year-over-year to $54.23 billion and net income soaring to $37.7 billion in the fourth quarter ended September 3.

Management forecasts even stronger results for the upcoming fiscal first quarter of 2027, targeting a revenue range of $60 billion to $63 billion and a non-GAAP gross margin of approximately 86.25%. While memory shortages are expected to persist, industry expansion efforts suggest that the supply shortage may not ease anytime soon.

Despite the imminent supply improvements and rising demand, Micron's stock may remain volatile, but its strong fundamentals and earnings growth potential make it an attractive long-term opportunity.