Micron Technology: AI Stock Bargain Buy for 2025

Micron Technology (MU) has been on a rollercoaster ride in 2024, with its stock price nearly doubling in the first half before giving back most of those gains in the second half. Despite the recent volatility, Micron's fundamentals and long-term prospects remain strong, making it an attractive bargain buy for AI investors looking ahead to 2025.

Micron's AI Opportunity
Micron is a rare AI commodity, with only three companies capable of producing advanced DRAM nodes. AI requires tons of DRAM memory for training massive datasets quickly and for better inferencing, making Micron's specialized products essential for the AI market. The company's DRAM makes up 73% of its revenue, with DRAM growth expected to outpace NAND, its other major product.

One of Micron's most significant growth opportunities lies in high-bandwidth memory (HBM), a new type of advanced memory crucial for AI applications. HBM is designed to provide high bandwidth and low latency, making it ideal for AI workloads. Micron's HBM revenue more than doubled quarter over quarter in the last reported quarter, and management maintains that it has the most advanced product in the market, in technology terms, with its HBM3E product having lower power consumption and higher speeds than those from SK Hynix.

Micron's HBM market share is expected to increase toward its overall DRAM market share by the end of 2025, with the HBM market growing from $16 billion in 2024 to over $30 billion in 2025. This growth opportunity alone could add over 25% to Micron's overall revenue. Furthermore, the HBM market is expected to grow further to over $100 billion in 2030, which would be larger than the entire DRAM industry in 2024. This could more than double Micron's revenue even without any growth in its other segments.



Micron's Competitive Advantage
Micron's competitive advantage lies in its rare AI commodity status, growing demand for HBM, and advanced HBM product. The company's DRAM intensity of AI is only supposed to accelerate in the coming years, with specialized AI memory being a current bottleneck. This trend further solidifies Micron's competitive advantage in the AI market.

Moreover, Samsung, the largest market share holder of the overall DRAM industry, has struggled to produce HBM at acceptable yields. This stumble opens up the potential for Micron to take even more market share of this all-important segment.



Micron's Risks and Challenges
While Micron's long-term prospects look promising, the company faces several near-term risks and challenges. Micron's revenue is expected to fall sequentially for the current quarter, marking the first sequential decline in nearly two years. This is due to sluggish demand in segments like smartphones, PCs, and autos, which could worry investors and potentially signal a bigger downturn in the memory market.

Additionally, the incoming Trump administration's trade policies and potential tariffs could pose challenges for Micron, which has a significant portion of its production capacity in Taiwan. Export restrictions on AI chips and equipment to China could also impact the company's operations.

Micron's Valuation
Micron's stock valuation can be compared to its peers and historical averages as follows:

* P/E ratio: Micron's P/E ratio is around 10.5, lower than its historical average of around 12.5 and significantly lower than its peers, such as Samsung Electronics (SSNLF) and SK Hynix (SKHYF), which have P/E ratios of around 15 and 12, respectively.
* P/S ratio: Micron's P/S ratio is around 2.5, lower than its historical average of around 3.5 and lower than its peers. Samsung and SK Hynix have P/S ratios of around 4 and 3, respectively.
* P/B ratio: Micron's P/B ratio is around 3.5, lower than its historical average of around 4.5 and lower than its peers. Samsung and SK Hynix have P/B ratios of around 6 and 4, respectively.

These valuation metrics suggest that Micron's stock is currently undervalued compared to its historical averages and its peers. This could be an opportunity for investors to buy the stock at a bargain price, given the company's strong position in the AI market and the growth potential of its HBM business.

Is Micron Stock a Buy, Sell, or Hold?
Micron's stock price has been volatile in 2024, but its fundamentals and long-term prospects remain strong. The company's rare AI commodity status, growing demand for HBM, and advanced HBM product give it a competitive advantage in the AI market. While Micron faces near-term risks and challenges, its valuation suggests that the stock is currently undervalued. Investors who have not managed to add exposure to Micron should consider capitalizing on the current levels to buy more shares before the stock potentially revisits its 2024 highs. Rating: Maintain Buy.

Important note: Investors are reminded to do their due diligence and not rely on the information provided as financial advice. Consider this article as supplementing your required research. Please always apply independent thinking.