Investing in artificial intelligence (AI) stocks has become increasingly popular as the technology continues to transform industries. However, many available options either come with high valuations or remain unprofitable due to heavy investments. Among this landscape, Micron Technology (MU) stands out as a rare gem: a profitable, undervalued AI stock that skyrocketed 140% in 2025, yet still appears to hold significant upside potential.
### Micron’s Financial Performance
Micron’s remarkable growth in 2025 can be traced back to its outstanding fiscal performance. The company reported a staggering 49% increase in revenue, amounting to $37.4 billion compared to the previous year. This surge was mirrored in its non-GAAP earnings per share, which jumped to $8.29 from a mere $1.30 the year before. These figures highlight the effectiveness of Micron’s strategy in leveraging the demand for high-bandwidth memory (HBM) chips, primarily utilized in AI servers.
### Demand for Memory Chips: A Critical Factor
One of the catalysts for Micron’s growth is the robust demand for memory chips. The HBM segment has seen significant activity attributed to its essential role in AI workloads, particularly within GPUs and custom AI processors. A report from Goldman Sachs predicts a 23% uptick in demand for GPU-related HBM and a staggering 82% from custom AI processors. With revenue from Micron’s Cloud Memory Business Unit (CMBU) soaring 3.5 times to $13.5 billion last fiscal year, the company is in a prime position to capitalize on this demand.
### Strategic Adjustments in China
Despite some hurdles, Micron is making strategic adjustments to maintain its growth trajectory. Recently, the company announced plans to stop selling AI server memory chips to Chinese customers due to ongoing geopolitical issues. This decision follows a ban imposed by Beijing in 2023 that limited Micron’s ability to sell memory products in China’s critical infrastructure sector.
While this might seem like a setback, it’s important to note that Micron generated only $2.6 billion from mainland China last year, representing 7% of its overall revenue. The company will continue selling its memory chips for applications in automotive, smartphones, and PCs, benefiting from established customer relationships both within and outside China. Moreover, freed-up data center memory capacity will be redirected to other markets, mitigating potential losses.
### Future Prospects: Supply Meets Demand
Micron’s adjustments illustrate its agile operational strategy. The management indicated their expectation to finalize agreements to sell out their total HBM calendar supply for 2026 in the near future. Given the accelerating demand for HBM, Micron is exploring ways to expand its manufacturing capabilities, ensuring it can meet both present and future needs.
The anticipated $4 trillion investment in AI infrastructure by 2030 signals a growing marketplace, which will undeniably impact Micron. As it secures partnerships with leading AI chip manufacturers such as Nvidia, Broadcom, and AMD, the future appears promising. With six customers now relying on Micron for HBM, the company’s growth trajectory looks robust.
### Valuation and Market Positioning
Micron’s valuation presents a compelling investment case. Currently, the company trades at around 24 times trailing earnings, significantly lower than the tech-heavy Nasdaq-100 index, which trades at 33 times. This disconnect suggests that Micron is undervalued relative to its peers, offering a golden opportunity for potential buyers.
Analysts have high expectations for Micron’s earnings growth, predicting a doubling of earnings in fiscal 2026. If Micron manages to align its price with the multiple of the broader tech index, it could translate to a price of around $550 per share in the next year, representing a potential gain of 170% from its current valuation.
### Conclusion
In the context of a rapidly evolving tech landscape, Micron Technology has positioned itself effectively to capitalize on the burgeoning demand for artificial intelligence and memory solutions. Despite its impressive rally in 2025, the stock remains undervalued relative to its earnings growth potential. The combination of robust financial performance, sound strategic adjustments, and a favorable market landscape makes Micron a standout choice for investors looking for a blend of profitability and growth in the AI sector. As the AI boom accelerates, investing in Micron now appears to be a savvy move ahead of expected substantial gains.
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