Micron: Valued As If There Is No AI

The stock market often moves on narratives, but sometimes it forgets the fundamentals. Nowhere is this more evident than in the case of Micron Technology (MU). Despite being a cornerstone of the AI revolution, Micron's stock is trading at a valuation that ignores the seismic shifts in demand for its products. With High Bandwidth Memory (HBM) demand surging and AI adoption accelerating, the disconnect between Micron's current valuation and its structural growth trajectory is staggering.

A Valuation That Defies Logic

Micron's price-to-earnings (P/E) ratio of 19.91 as of July 2025 is a fraction of its peers' averages. The semiconductor industry's median P/E is 23.55, while companies like NVIDIA (56.27) and AMD (126.33) trade at multiples that reflect sky-high expectations for AI-driven growth. Micron, meanwhile, is priced as if it's a traditional memory company, not a leader in the most critical component of AI infrastructure.

Even more striking is Micron's price-to-book (P/B) ratio of 2.45. While the industry median is 2.23, Micron's P/B is inflated by its robust balance sheet and growing book value. Over the past decade, its book value per share has grown at a 17.9% annualized rate, and in 2025 alone, it's rising 13.7% year-over-year. This suggests the market is undervaluing Micron's tangible assets and long-term capital appreciation potential.

HBM: The AI Revolution's Unsung Hero

The real story lies in HBM. Micron's HBM3E 12-high stacks are already in volume production, powering NVIDIA's B200 and AMD's MI350X accelerators. These chips deliver 50% more capacity than 8-high alternatives, enabling AI models to process data at unprecedented speeds. In Q3 2025, HBM revenue hit $1.69 billion, with demand so strong that Micron's entire 2025 supply is sold out.

The market is projecting HBM revenue to jump from $18 billion in 2024 to $35 billion in 2025, with a compound annual growth rate (CAGR) of 33% through 2030. Micron's current 20% market share positions it to capture a significant portion of this growth. By 2026, the company plans to ramp HBM4 production, which offers 2 terabytes per second of bandwidth and 20% lower power consumption. This next-generation product will further cement Micron's leadership in AI memory solutions.

Why the Market Is Missing the Point

Micron's valuation appears to ignore the structural tailwinds it faces. Its forward P/E of 17.1x for 2025 is a stark contrast to the 40.5x of NVIDIA and 30.2x of AMD. Even more compelling is its PEG ratio of 0.84, calculated using 25.8% annual earnings growth. A PEG below 1.0 typically signals undervaluation, and Micron's ratio suggests the market is underpricing its long-term potential.

The recent 15.5% selloff in Micron's stock since Q1 2025 earnings has created a valuation gap. Analysts remain bullish, with 84% of 43 surveyed rating it as a “buy” or “overweight.” The median price target of $130 implies a 30% upside from current levels. This optimism is justified: Micron's Q3 2025 net income surged 5.7X year-over-year, driven by HBM3E's premium pricing and gross margins climbing to 39%.

Strategic Investments for Long-Term Dominance

Micron is not resting on its laurels. The company is expanding backend manufacturing in Singapore and investing $150 billion in U.S. fabrication facilities to secure supply chains and meet AI demand. Its $50 billion R&D budget is focused on HBM4 and advanced packaging technologies, ensuring it stays ahead of competitors. These investments are critical for maintaining its 20% HBM market share and scaling to 23% by 2033.

Moreover, Micron is diversifying into the automotive sector, where HBM4's functional-safety features align with ISO 26262 standards for autonomous vehicles. This opens a new revenue stream and reduces reliance on volatile consumer electronics markets.

A Re-Rating Is Imminent

The market's current valuation of Micron is a mispricing that cannot last. As AI adoption accelerates and HBM demand outpaces supply, investors will inevitably recognize Micron's pivotal role. The company's robust balance sheet (current ratio of 3.13x, debt-to-equity of 0.31x) and disciplined capital allocation further strengthen its case.

For investors, the opportunity is clear. Micron's valuation multiples, combined with its leadership in HBM and strategic investments, make it a compelling long-term play. The AI revolution is here, and Micron is the unsung hero powering it. Ignoring its stock is akin to betting against the future of computing.

In conclusion, Micron is undervalued not because it lacks growth, but because the market is still catching up to the reality of AI-driven demand. As HBM becomes the backbone of AI infrastructure, a re-rating is not just possible—it's inevitable. For those with a long-term horizon, Micron offers a rare combination of structural growth, competitive advantages, and a compelling valuation.