Should you buy Micron Technology stock while it's below $1,000? It's a question that has many investors scratching their heads. The company's stock has been on a wild ride, soaring from around $50 in early 2023 to a peak of $1,213 last month, a 2,070% gain over three and a half years. But now, it's plummeted by 30% from its recent high and is trading under $1,000. So, is this a buying opportunity or a sign to stay away?
In my opinion, the answer is a bit more nuanced than a simple yes or no. While Micron's high-bandwidth memory (HBM) for data centers is a critical component in the AI hardware stack, and demand currently exceeds supply, there are some clouds on the horizon. Recent reports suggest that some businesses are curbing their AI software spending, which could affect future demand for chips and other hardware components.
One thing that immediately stands out is that Micron's sales are growing at a mind-boggling rate. The company delivered a record $41.4 billion in revenue during its fiscal 2026 third quarter, a whopping 346% increase from the year-ago period. AI-related memory fueled that strong result across all four of the company's business segments, led by cloud memory, which contributed the most revenue thanks to booming HBM sales. But every major memory company is frantically building more manufacturing capacity, so supply will eventually catch up to demand, which will make it very difficult for the likes of Micron to maintain its current level of earnings.
What makes this particularly fascinating is that the global memory shortage is giving Micron and its competitors the ability to dictate prices, which is significantly boosting the company's revenue and profit margins. However, as memory supply inevitably increases over the next couple of years, it might run into a simultaneous decrease in demand. Soaring infrastructure costs have forced AI providers such as Anthropic and Microsoft to implement passive price increases for the use of their models and software, so many of their customers are rethinking their usage.
A recent survey from investment bank UBS Group found that 60% of businesses are curbing their AI spending by routing some tasks to cheaper, more efficient models. Even the biggest companies are feeling the pinch; Walmart, Amazon, and Uber Technologies have recently capped AI usage for their employees to prevent budget blowouts. This doesn't bode well for long-term semiconductor demand.
In my view, Micron stock looks like a bargain given its price-to-earnings (P/E) ratio is just 19.2, making it substantially cheaper than the Nasdaq-100 index which has a P/E of 33.4. Plus, based on Wall Street's earnings estimate for fiscal 2027, Micron's forward P/E is just 5.6. However, I'm in no hurry to buy Micron's recent dip. While the company's stock could deliver a positive return from here over the next five years or so, once physical AI segments such as autonomous vehicles and robotics are commercialized at scale, there could be some major volatility in the near term as additional memory supply comes online and the demand picture becomes more uncertain.
In conclusion, while Micron's HBM is crucial to the AI revolution and its stock looks like a screaming buy from a long-term perspective, there are some cautionary tales to consider. The company's stock is not a clear-cut buy based on its recent financial results alone, and there are signs that demand for AI hardware may be slowing. So, if you're thinking of buying Micron stock, it's important to take a step back and think about the bigger picture. What this really suggests is that while Micron's stock may be a bargain right now, it's important to be cautious and consider the potential risks and uncertainties that lie ahead.
