Is Micron Technology (MU) Still a Buy at Record Highs?

Micron Technology (MU) has surged to record highs in 2025, driven by robust demand for AI-driven memory solutions and a dramatic improvement in profitability. But as investors weigh whether the stock remains a compelling buy, the key questions revolve around valuation resilience and the sustainability of supply-demand dynamics in the memory sector. A deep dive into the company's financials, industry positioning, and macroeconomic trends reveals a nuanced picture.

Valuation Resilience: A Tale of Contradictions

Micron's valuation metrics in 2025 reflect both strength and caution. Its price-to-earnings (P/E) ratio stands at 23.62, above its four-quarter average of 19.2 but significantly below the semiconductor industry's average of 37.6x. Similarly, its EV/EBITDA ratio of 14.31 is below the industry median of 17.9 according to data, suggesting relative undervaluation compared to peers. The company's price-to-book (P/B) ratio of 4.79 also outpaces its 5-year average of 2.1 as reported, signaling investor confidence in its asset base.

However, a discounted cash flow (DCF) analysis complicates this narrative, estimating Micron is overvalued by 127% based on an intrinsic value of $103.15 per share. This discrepancy highlights the tension between traditional valuation metrics and forward-looking expectations. While the DCF model assumes stable cash flows, Micron's current performance-marked by a 28.1% net margin and 32.5% operating margin-suggests its profitability is far from static. The semiconductor industry's historically high P/E ratios with a 3-year average of 51.8x further contextualize Micron's 30.8x multiple as a potential bargain, particularly given its focus on high-margin AI applications.

Supply-Demand Dynamics: AI as a Tailwind

The AI-driven memory market is the linchpin of Micron's growth story. In 2025, the company's Data Center business unit accounted for 56% of total revenue, fueled by surging demand for high-bandwidth memory (HBM) from tech giants like Meta, Microsoft, and Google. Micron's HBM order book is fully booked through 2026, with pricing locked in for most of that period, ensuring stable revenue streams. Gross margins have soared to over 50%-a stark contrast to the 22% recorded in 2024-underscoring the profitability of AI-related memory sales.

Yet supply constraints persist. HBM production requires significantly more silicon wafers and factory resources than standard DRAM, creating bottlenecks that Micron expects to last beyond 2026. To address this, the company plans to increase DRAM and NAND shipments by 20% in 2026 and accelerate production at its Boise, Idaho, fabrication plant, with first wafers expected in mid-2027. These moves align with broader onshoring trends and position Micron to capitalize on pricing premiums in the AI memory market.

Competitive Positioning: A Narrow Window of Opportunity

Micron's dominance in HBM is a critical differentiator. Alongside Samsung and SK Hynix, it is one of only three producers of this specialized memory, but its U.S.-based operations align with global efforts to reduce supply chain risks. Analysts from Morgan Stanley and Goldman Sachs have labeled the stock a "strong buy," with price targets as high as $500, reflecting confidence in its ability to outperform rivals. The company is also investing in next-generation HBM technologies, including HBM3E and HBM4, which could further solidify its leadership in the AI era.

However, the exit of its consumer-facing Crucial business to focus on high-margin AI and data center markets signals a strategic pivot. While this reduces exposure to volatile consumer demand, it also narrows Micron's addressable market. Investors must weigh whether the trade-off is justified by the potential for sustained profitability in AI-driven segments.

Conclusion: A Buy, But With Caution

Micron's valuation appears resilient relative to industry peers, with EV/EBITDA and P/E ratios suggesting undervaluation despite record highs. The AI-driven memory market offers a powerful tailwind, with supply constraints and pricing power supporting near-term margins. However, the DCF analysis and the semiconductor industry's tempered long-term expectations reflected in a 36.2x P/E ratio warrant caution.

For investors, the key is to balance optimism about AI's transformative potential with prudence regarding valuation extremes. Micron's strategic focus on high-margin HBM, coupled with its aggressive capacity expansion, positions it well to navigate the next phase of the memory cycle. While the stock may not offer the same explosive growth as 2025, its fundamentals suggest it remains a compelling buy for those with a medium-term horizon.