Think It's Too Late to Buy Micron Stock? Here's the 1 Reason Why There's Still Time.
Key Points
Micron is trading at a tempting valuation, despite the stock's monster run in 2025.
Memory prices are increasing due to strong data center demand.
There are risks, but Micron is riding the growth in data center spending.
Micron Technology (NASDAQ: MU) stock exploded to new highs in the second half of 2025. The memory chip supplier looks very tempting from a valuation perspective, trading at just about 9 times this year's earnings estimates.
However, this is historically a very cyclical business, with swings in demand and selling prices causing lumpy financial results. Nonetheless, there is one reason that Micron stock might have more upside for investors in 2026, and maybe beyond.
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Image source: Micron Technology.
Why buy Micron stock?
The stock soared following record revenue and robust year-over-year earnings growth. Analysts expect earnings to reach $32.14 in the current fiscal year, according to Yahoo! Finance, up from just $8.29 in the previous year. Micron's profits are soaring as data center demand is driving up prices for dynamic random access memory (DRAM), which increased 20% quarter over quarter recently.
During the company's fiscal first-quarter 2026 earnings call, management highlighted that demand for memory continues to exceed supply. These conditions could extend through 2026. Micron has already sold out of its entire 2026 supply of high-bandwidth memory products. Management expects the addressable market for these advanced memory chips to grow at a 40% annual rate, reaching $100 billion by 2028.
Investors should be mindful of Micron's cyclical history, which is the greatest risk in buying the stock at these highs. Still, the stock is not pricing in the shortage to persist, even though demand for AI cloud services exceeds data center capacity at nearly every leading cloud services provider. Further investment in data center infrastructure could still send the stock higher in 2026.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.