Is It Too Late to Buy Micron Stock? Not According to This Bull

Shares of Micron (NASDAQ:MU | MU Price Prediction) were pretty much unstoppable before shares swiftly corrected by more than 13% this week. Undoubtedly, the plunge seems more to do with the current state of the market than anything else. At the end of the day, Micron finds itself in the right place at the right time. And as industry dynamics allow the firm to raise the bar on prices, there’s every reason to believe that the firm can continue to report blowout quarter after blowout quarter. The global RAM shortage could last well over a year, maybe even longer.

All of this translates to unprecedented pricing power, as the AI revolution looks to accelerate at a pace that’s faster than even industry experts were expecting. For the foreseeable future, Micron and the few other rivals in memory chips are the place to be for investors seeking upside surprises. Of course, if there’s an AI bubble and it does burst before the RAM shortage is addressed, shares of Micron could be at risk of amplified downside. At the same time, it’s also tough to tell how the RAM situation will look in two years or so from now.

Micron is booming, but the party will end eventually

Will there be a glut as various firms pull back on their AI capital expenditures? It’s tough to tell. There’s also a chance that a peak might be further out, especially as next-generation compute demands even more memory. If the memory-to-compute ratio starts moving lower due to more of an efficiency focus, perhaps RAM could be in for a considerable price drop.

Either way, with firms like OpenAI eager to scale up compute as quickly as possible, even as the bills rack up, I’d argue that it’s hard to time a reversal of trend. At some point, there’s sure to be a correction in prices, but like with Nvidia (NASDAQ:NVDA), timing the top is going to be a hard thing to do. As such, shorting a stock into such explosive momentum seems like a very bad idea.

At this juncture, shares of Micron are up more than 305% in a single year. That stock chart might have bubble written all over it. However, valuation metrics tell another story. In fact, from the fundamental viewpoint, shares might still be too cheap at 13.2 times forward price-to-earnings (P/E). Arguably, that’s a multiple for a deep value stock. If Micron continues to sell one of the hottest commodities out there to hungry AI firms ready to spend big money, there’s potential for the multiple to contract further. Either way, Micron stands out as a compelling long-term hold, but an uncertain mover over the near term.

A path to $450 might be set

One notable bull over at William Blair thinks Micron stock has a path to $450 per share. The AI-driven product cycle and the necessity of high-performance RAM are bull points, which may be less surprising. While Micron might be entering a “golden age” of demand, investors may wish to prepare for steep bumps in the road.

The latest pullback might be worth getting behind if you think the AI revolution is just getting started and that future chips are going to need increasing amounts of RAM. It’s really hard to tell. But the big question is whether the spenders are going to listen to investors by easing on AI spending in future years. If so, perhaps demand might be cooler than expected once supply has a chance to catch up with demand.

Personally, I wouldn’t be a buyer at close to $380 per share, even if some analysts expect more room to run. The memory chip shortage may be unprecedented, but that’s already been priced in for some time now.