Micron Technology (MU): A Strategic Buy Amid Transient Turbulence

The semiconductor sector has been a rollercoaster in 2025, but Micron Technology (MU) stands out as a contrarian play. Despite near-term volatility, its earnings trajectory, undervalued metrics, and upcoming catalysts make this a compelling buy. Let’s dissect the data.

Earnings Trajectory: Consistent Beats in a Growth Engine

Micron’s fiscal Q2 2025 results underscore its resilience. Revenue hit $8.05 billion, a 38% year-over-year jump, driven by a tripling of data center sales fueled by AI demand. Adjusted EPS of $1.56 smashed estimates by 195%, while guidance for Q3 2025—$8.6–9.0 billion in revenue and $1.47–1.67 EPS—exceeds consensus. Crucially, this growth isn’t a flash in the pan:
- Year-to-date 2025, MU shares rose 22% before the latest report, reflecting investor confidence in its AI tailwinds.
- Data Center Revenue now accounts for over 50% of total sales, a historic shift underpinned by Micron’s leadership in High Bandwidth Memory (HBM), critical for AI chips.

Valuation: A Discounted Bargain in a Growth Market

Micron’s valuation is starkly undervalued compared to peers. As of May 2025, its P/E ratio of 4.17 (based on TTM EPS of $23.04 and a stock price of $96.09) is 85% below NVIDIA’s 30x P/E and 83% below TSMC’s 25x P/E. Even Intel’s P/E of 12x outpaces Micron’s current multiple.

Historically, Micron’s P/E has averaged 14x over the past decade, suggesting significant upside. The recent dip to 4.17 is an anomaly, likely tied to short-term headwinds like NAND underload charges and inventory adjustments. These are temporary, while Micron’s $6.1 billion U.S. government subsidy and $4.4 billion in Q2 EBITDA signal long-term strength.

Zacks’ Hold Rating: A Misplaced Concern?

Zacks’ #3 Hold rating hinges on near-term risks: NAND pricing pressures and a 149-day inventory build. However, these are cyclical issues Micron is actively addressing. Management emphasized:
1. Margin Expansion: Gross margins are expected to rebound post-Q3 NAND underload adjustments.
2. HBM Dominance: HBM revenue doubled sequentially in Q2, and Micron aims to maintain 25–30% market share in this $10B+ AI memory segment by 2026.

The Hold rating overlooks Micron’s $8.75 billion cash hoard and $1.12B Q2 free cash flow (despite $3.13B capex), which fund R&D and dividends. This is a company with $3.24B in operating cash flow—not a distressed asset.

Catalysts on the Horizon

• Q3 Earnings (July 2025): If Micron meets or exceeds its $8.6B revenue guidance, it will solidify its AI narrative.
• HBM4 Launch: Micron’s next-gen HBM4 chips, targeting 2026, could capture 60% of AI server memory demand.
• CHIPS Act Funding: The $6.1B award ensures Micron’s U.S. factories dominate advanced DRAM production, sidelining cheaper Chinese competitors.

The Bottom Line: Buy the Dip

Micron’s valuation is a screaming buy signal. At 4.17x P/E, it’s priced for failure despite its AI-led growth and fortress balance sheet. The Zacks Hold rating is a lagging indicator; the market will recalibrate when Q3 results confirm Micron’s dominance in the $100B AI infrastructure market.

Action: Accumulate MU now. Set a price target of $120–$130 by early 2026 as AI adoption soars and valuation multiples normalize. This is a generational opportunity in tech.