Micron Technology (NASDAQ: MU) is one of the world’s leading suppliers of high-bandwidth memory for data centers, powering the artificial intelligence hardware stack.
Demand for Micron’s memory products has surged dramatically, creating a severe global shortage that gives the company considerable pricing power over its customers.
Despite these favorable conditions, Micron stock recently plummeted by 32% from its June record high, rattling investor confidence across the sector.
Concerns are mounting about the sustainability of the AI infrastructure spending boom, as soaring chip and component costs threaten the financial viability of deploying AI software at scale.
To keep things in perspective, Micron stock is still sitting on a one-year gain of almost 700%, meaning the broader uptrend remains largely intact for longer-term shareholders.
According to a forecast by Bloomberg, there will be around 118 gigawatts worth of data center capacity installed across the U.S. by 2030 to support the AI boom.
Nvidia CEO Jensen Huang says building a single gigawatt worth of capacity requires $50 billion worth of capital investment, pointing to a staggering $5.9 trillion in total spending by 2030 if Bloomberg’s forecast proves accurate.
Microsoft and Anthropic recently implemented price increases for some of their AI software products, with Uber Technologies burning through its entire 2026 AI budget in just four months by using Anthropic’s Claude Code.
Uber’s chief operating officer said it’s becoming hard to justify the current rate of spending, and Amazon and Walmart have since joined Uber in capping AI usage for their employees to prevent further budget blowouts.
A survey by UBS Group found that 60% of businesses are now routing tasks to cheaper, more efficient AI models to help reduce costs, signaling a meaningful shift in enterprise AI consumption habits.
Any reduction in AI software spending will mean less demand for computing capacity, with knock-on effects eventually hitting chipmakers like Micron in the form of weaker sales.
Micron delivered a record $41.4 billion in total revenue during its fiscal 2026 third quarter ended May 28, a whopping 346% increase from the year-ago period.
The company also generated earnings of $24.67 per share during the quarter, a remarkable 1,368% increase from the year-ago period, reflecting its extraordinary pricing power in a constrained global market.
Micron’s guidance for the current quarter points to $50 billion in revenue and earnings of $30.73 per share, though a demand slowdown could still impact final results before August ends.
Based on Micron’s trailing 12-month earnings of $44.23 per share and its closing stock price of $823 on Friday, July 31, the stock trades at a price-to-earnings ratio of just 18.6.
That represents a substantial discount to the Nasdaq-100 index, which carries a P/E ratio of 32.6, suggesting Micron appears undervalued relative to its big-tech peers on a trailing basis.
Wall Street expects Micron to grow its earnings to $153.74 in fiscal 2027, placing the stock at a forward P/E ratio of just 5.3, which looks like a compelling bargain on paper.
However, if AI hardware demand softens or competitors flood the market with new manufacturing capacity, those earnings forecasts may prove far too optimistic for Micron to realistically achieve.
The combination of uncertain demand and growing supply-side competition makes it genuinely difficult to pin down a fair valuation for Micron stock at this moment in the cycle.
For investors weighing the risk-reward balance, the uncertainty surrounding the AI spending boom makes Micron a tricky investment despite its seemingly low valuation multiples.
