Micron Technology (MU): A 16% Pullback Creates a Buying Opportunity in a Fast-Growing Chip Stock
Micron Technology (MU) has been one of the biggest winners of the AI infrastructure boom, but a recent pullback has given investors another chance to buy shares at what we believe is an attractive valuation.
The stock has fallen approximately 16% over the past month, partly due to concerns about competition from Chinese memory chip manufacturers and some profit-taking following an extraordinary rally.
Despite that decline, Micron is still up more than 200% this year. And with demand for its products continuing to outpace supply, we think the company’s growth story is far from over.
What makes Micron particularly interesting is that its earnings are growing rapidly, yet its valuation remains surprisingly low.
Micron is one of the world’s three dominant suppliers of high-bandwidth memory (HBM), a critical component used in AI computing systems. These specialized memory chips allow powerful processors to access and move enormous amounts of data efficiently.
As technology companies continue building AI data centers, demand for HBM has surged beyond the industry’s ability to supply it.
That’s created an unusually favorable environment for Micron.
The company has already sold out its HBM production for 2026 and secured customer commitments covering 75% of its expected shipments for fiscal 2027.
That level of demand visibility is especially encouraging in the semiconductor industry, where unpredictable purchasing cycles have historically caused sharp swings in revenue and profitability.
And management expects demand to remain strong well beyond next year.
During Micron’s fourth-quarter earnings call on October 1, President and COO Manish Bhatia said the company was seeing stronger demand drivers for 2027 and 2028 than it had previously anticipated.
In fact, customer discussions are already extending into 2028 as buyers work to secure future memory supplies.
We think that’s an important development. It suggests Micron’s current growth isn’t simply the result of a short-term surge in orders. Customers are planning their infrastructure investments years in advance, and memory is becoming an increasingly important part of those plans.
Micron is also taking steps to make its revenue more predictable.
The company has been expanding its use of long-term strategic customer agreements, which establish commitments extending several years into the future.
Micron signed 16 of these agreements during its third quarter and added another 10 in the fourth quarter, bringing the total to at least 26 new agreements across those two quarters.
Management expects strategic customer agreements to account for approximately 35% of revenue by 2030.
That’s a meaningful shift for a company operating in an industry known for its cyclical nature.
These longer-term relationships could help Micron maintain stronger earnings even after the current memory supply shortage eventually eases, potentially around 2029 or later.
They could also provide some protection as additional competitors enter the market, particularly manufacturers in China.
Of course, competition remains a legitimate concern. New suppliers could eventually put pressure on memory prices and market share.
But Micron’s existing customer relationships, production commitments and position among the three leading HBM suppliers give it substantial advantages as the market continues expanding.
The other major reason we like Micron right now is its valuation.
Despite the company’s remarkable stock-price performance, shares trade at just 11 times earnings and approximately five times forward earnings.
Its five-year price-to-earnings-to-growth (PEG) ratio is only 0.17, suggesting the stock is inexpensive relative to its projected earnings growth.
Those are unusually low valuation multiples for a company benefiting from such strong demand.
Micron shares trade around $934, down approximately 16% over the past month and well below their 52-week high of $1,255.
Even after the pullback, the stock has delivered exceptional returns. The source reports gains of approximately 216% year to date and 312% over the past 12 months, along with an average annualized return of 142% over the past three years.
Those gains help explain why some investors have recently taken profits.
But we don’t think the rally alone is a reason to avoid the stock, especially when its forward earnings multiple remains so low.
The bigger question is whether Micron can sustain its earnings growth as the memory market evolves.
Semiconductor demand is cyclical, and today’s supply shortages won’t necessarily last forever. If memory prices weaken or competitors expand production faster than expected, Micron’s earnings could come under pressure.
That also means its unusually low forward P/E should be viewed with some caution. The multiple depends on earnings forecasts that could change if industry conditions deteriorate.
Still, we believe the company’s current position is compelling.
Micron has already secured substantial demand for 2027, is negotiating customer allocations into 2028, and is building a portfolio of long-term agreements designed to support revenue through 2030 and beyond.
Meanwhile, the continued construction of AI computing infrastructure provides a powerful source of demand for its high-bandwidth memory products.
We particularly like that investors don’t have to pay an exceptionally high earnings multiple to participate in that growth.
At around $934 per share, we’re recommending Micron Technology as a long-term growth stock to buy following its recent pullback.
With HBM production sold out for 2026, strong customer commitments extending into 2027 and 2028, and shares trading at approximately five times forward earnings, we think Micron offers an attractive combination of growth potential and valuation for investors willing to hold through the semiconductor industry’s inevitable ups and downs.
