Micron Technology: Riding the AI Wave Amid Market Challenges

The semiconductor industry is essential to the artificial intelligence (AI) boom. While many investors spotlight Nvidia (NASDAQ: NVDA) due to its leading data center chips, Micron Technology (NASDAQ: MU) also stands out as a key player benefiting from this technological surge.

Micron is known as a top supplier of memory and storage chips, crucial for AI hardware. The company has seen its data center revenue skyrocket and is eyeing significant growth in smartphones and personal computing as well.

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Recently, Micron released strong financial results for its fiscal 2025 first quarter, which ended on November 28. Although the stock dropped 12% in after-hours trading, broader market trends affected this performance; the Nasdaq-100 technology index fell 3.6%—its second-biggest drop this year.

Despite the overall downturn, this may present a promising chance for investors looking ahead to 2025. An analysis from The Wall Street Journal shows that 43 analysts are bullish on Micron, with most assigning the stock the highest buy rating. Let’s explore why Wall Street is optimistic.

Image source: Getty Images.

Growing Demand for Memory in AI Applications

Memory chips play a critical role alongside Nvidia’s GPUs. They allow instant information retrieval, a necessity for data-heavy AI tasks. Today, many AI models depend on trillions of data points, which drives up memory requirements.

Micron’s HBM3E (high-bandwidth memory) products lead the market, delivering 50% more capacity than competitors while using 30% less energy. That’s why Nvidia selected Micron’s HBM3E for its high-powered Blackwell GB200 GPU, the company’s latest AI chip.

All of Micron’s data center memory chips are sold out through 2026, but the company isn’t sitting idle. It is already developing the next-generation HBM4E solution, promising a 50% performance boost over HBM3E. The current data center HBM market is valued at around $16 billion, and Micron forecasts it could grow to $100 billion by 2030. Advancing technology will be essential for Micron to capture this growth.

The AI narrative extends beyond data centers; PCs and smartphones are increasingly capable of handling some AI tasks on their own. Micron notes that PCs with AI processors typically need between 16 and 24 gigabytes of DRAM memory—up from an average of 12 gigabytes in non-AI PCs last year. Higher capacity often leads to pricier DRAM chips, resulting in increased revenue for Micron.

In the smartphone sector, over 60% of new devices with Micron’s chips required at least 8 gigabytes of memory this past quarter, an increase compared to last year. There are also reports that several Android manufacturers plan to roll out AI devices featuring 12 and 16 gigabytes of memory, showcasing rapid advancements in capacity.

Rapid Revenue Growth for Micron

Micron achieved a record $8.7 billion in revenue during its fiscal 2025 first quarter, which represents an impressive 84% increase from the previous year. However, a deeper look reveals even more about the company’s success.

Data center revenue soared by 400% year-over-year, hitting $4.4 billion. This segment accounted for more than 50% of Micron’s total revenue, and the upward momentum is expected to continue as shipments are exceeding expectations.

Mobile segment revenue reached $1.5 billion, reflecting a 15% year-over-year increase, although it declined compared to the previous quarter. As demand for higher DRAM capacity from AI grows, 2025 could be a strong year for this segment as well.

Micron also reported a significant jump in profits, with non-GAAP (generally accepted accounting principles) earnings per share (EPS) rising to $1.79 this quarter, a notable shift from a loss of $0.95 per share a year prior. Profitability for Micron can be volatile due to the semiconductor industry’s cyclical nature. For instance, the company posted only $1.30 in non-GAAP EPS for all of fiscal 2024 due to high inventory and soft pricing. Fortunately, these issues were less prevalent in the first quarter of fiscal 2025, aided by strong AI demand.

Analysts Maintain Optimism on Micron Stock

With AI products like HBM3E already sold out for next year, Micron’s financial outlook appears more predictable. Wall Street’s consensus estimate (from Yahoo!) projects the company will achieve an EPS of $8.90 for fiscal 2025, positioning its stock at a forward price-to-earnings (P/E) ratio of just 10.2.

This presents a 65% discount compared to Nvidia’s forward P/E ratio of 29.6. Given the rapid growth in Micron’s data center segment, it seems that this discount may be excessive. Micron’s HBM3E sales are directly linked to Nvidia’s GB200 sales, making it hard to remain pessimistic on Micron’s future if Nvidia’s sales surge.

Such optimism is evident in Wall Street’s outlook on Micron stock. Of the 43 analysts covered by The Wall Street Journal, 29 have given it the highest buy rating, 10 are bullish but not at the highest rating, and 3 recommend holding. Notably, only one analyst suggests selling.

The average price target for Micron stock is $146.82, which indicates potential growth of 61% over the next 12 to 18 months. The analysts’ most optimistic target reaches $250, suggesting a possible upside of 174%.

For investors looking for value in the thriving AI semiconductor market, Micron stock may be worth considering as we enter the new year.

Should You Invest $1,000 in Micron Technology Now?

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein represent the author’s perspectives and do not necessarily reflect those of Nasdaq, Inc.