Semiconductor producer Micron Technology’s (MU) blockbuster earnings report in September demonstrated its growing dominance in a booming artificial intelligence (AI) market. This stellar performance, coupled with a valuation that seems disconnected from its strong growth trajectory, makes me bullish enough to add shares this October.
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My conviction stems from the company’s seismic shift into a high-margin AI infrastructure leader and its startlingly low forward price-to-earnings-to-growth (PEG) ratio of approximately 0.2, with a 0.68 result over the previous financial year. As an investor seeking a growth stock at a reasonable price, the evidence is clear: Micron stock remains fundamentally undervalued despite printing new all-time highs, which keeps me solidly Bullish.
A Semiconductor Manufacturer Transformed by AI Demand
Micron has effectively shed its skin as a purely cyclical commodity memory maker to become a critical partner in AI infrastructure. This transformation was crystal clear in its fiscal fourth-quarter 2025 results, where revenue soared 46% year-over-year to $11.3 billion. The company’s revitalized business model is further emphasized by a recent change in its business segment reporting, which now shines a direct spotlight on its high-growth, high-margin AI-driven product lines.
The newly formed Cloud Memory Business Unit (CMBU), which houses premium products including High-Bandwidth Memory (HBM) chips for AI accelerators and memory solutions for hyperscale cloud customers, saw its quarterly revenue skyrocket 214% year over year. The unit now represents a massive 40% of total revenue and boasts a stellar gross margin of 59%.
Combined with the Core Data (CDBU), which provides foundational memory and storage solutions for data center operations, the two high-growth, high-margin segments suddenly contribute the majority of Micron’s annual revenue, at 55.5% in 2025, up from 35% a year ago.
Any further revenue growth from AI-related memory demand in 2026 will significantly lift Micron’s gross margins and operating margins going forward. Incremental growth from here will be a fundamental re-rating of the business, proving Micron is a direct and substantial beneficiary of the massive capital expenditures directed toward AI data centers globally.
Growth is coming. Management guides for $12.5 billion in next quarter’s sales, implying a 44% revenue growth year-over-year. Gross margins may expand further to 50.5%, boosted by high-margin HBM chips.
Furthermore, if the consumer market for automobiles, mobile phones, and household appliances increasingly adopts AI-embedded products, Micron could see its high-margin memory products sell well over the next two to three years, thereby expanding its overall margins and growing its earnings and cash flow at an accelerated rate.
Micron Dominates the High-Stakes HBM Market
High-bandwidth memory is a specialized, high-performance memory that works in conjunction with advanced GPUs from companies like Nvidia (NVDA) to train and run complex AI models. It’s a tight market characterized by three leading suppliers (SK Hynix, Samsung (SSNLF), and Micron Technology), high barriers to entry, and lucrative margins. After re-entering the HBM market in 2024, Micron is crushing the competition. Recent industry data shows its market share leaping to 21% in the second quarter of 2025, up from a mere 5% in 2024, while its key rival, Samsung, saw its share plummet.
Meanwhile, Micron’s HBM revenue is surging. The company has already shipped samples of its next-generation HBM4 product, which boasts industry-leading performance, and has expanded its customer base to six major players. With pricing agreements already in place for its 2026 HBM supply capacity, Micron may gain more market share and enjoy sustained pricing power. It’s a key partner to AI chip manufacturing.
Profitability and Cash Flow Soar
The financial impact of Micron’s shift in improving product mix is profound. As higher-margin HBM and data center memory sales become a larger part of the pie, Micron’s overall profitability is expanding dramatically. The company’s gross margin has expanded significantly to 46%, up from 36% a year ago, and its guidance for the current quarter indicates that gross margins will exceed 50%. With operational leverage flowing directly to the bottom line, earnings per share are expected to double by 2026.
While free cash flow generation may remain restrained in 2026 as the company reinvests heavily in expanding its production capacity and R&D, this spending is a necessary step to capture long-term demand growth. It’s an investment in future growth, supported in part by U.S. government subsidies. Given the tight HBM production capacity availability for 2026, Micron’s increased capital expenditures seem well-timed to generate significant returns during an AI spending boom.
High-Growth AI Winner Trades at Deep-Value Multiples
Valuation is where the investment case for Micron Technology stock becomes almost undeniable. Despite its staggering growth profile, Micron’s valuation remains deeply attractive. The stock trades at a forward P/E ratio of just 11.1x. To put that in context, peers like Advanced Micro Devices (AMD) and Broadcom (AVGO) trade at 42x and 49.5x, respectively, despite having lower earnings growth forecasts.
The most telling metric is the forward PEG ratio, which compares a stock’s P/E to its expected earnings growth rate. A PEG below 1.0 typically suggests a stock may be undervalued, given its future earnings growth potential.
Micron’s forward PEG ratio stands at a remarkably low 0.17, indicating a significant disparity between its market price and its near triple-digit earnings growth potential. This discount may stem from memories of its past cyclicality, but the AI supercycle, which is driving demand for its most advanced products, appears to be a powerful and sustained counter-cyclical force.
Is MU a Good Stock to Buy?
The bullish thesis on Micron Technology is widely shared on Wall Street. The consensus analyst rating for MU is a Strong Buy, based on 24 Buys and 3 Holds during the past three months. The average analyst price target of $197 implies a potential upside of almost 5% over the next twelve months.
Growth Powerhouse Still Priced Like a Value Stock
Micron Technology represents a rare find for investors looking for growth at a reasonable price. It’s a company with explosive revenue and earnings growth at the heart of the AI megatrend, yet still trading at the multiples of a value stock.
Micron’s story has evolved, but the market’s valuation hasn’t caught up. The stock looks too undervalued to ignore for a long-term portfolio, and I’ll be watching for attractive entry points in October.