This AI Stock Is Flying Under the Radar After a 44% Drop — Here’s Why It’s a Smart Buy

Micron Technology (MU), a leading memory-chip manufacturer, has experienced a significant AI stock decline, down 44% from its recent peak. Despite this downturn, the company’s strong position in the Stock sector and impressive growth in data center revenue suggest it may be an attractive investment opportunity.

Company Overview

Micron specializes in memory chips, including DRAM, NAND, and high-bandwidth memory (HBM). As an integrated device manufacturer, it designs and produces its own chips, allowing for greater control over production and margins. The memory chip industry is known for its cyclical nature, with periods of high demand followed by oversupply. Micron’s integrated model positions it to capitalize on favorable market conditions.

Recent Performance of AI stock

In its latest earnings report for the quarter ending November 28, Micron reported:

• Data Center Revenue Growth: Over 400% year-over-year increase.
• Total Revenue: 84% increase to $8.7 billion.

Notably, data center revenue accounted for more than 50% of total revenue for the first time, indicating Micron’s growing presence in the AI computing market.

Market Reaction

Despite these strong results, Micron’s stock fell sharply following the earnings announcement, primarily due to conservative guidance for the upcoming quarter. The company anticipates a sequential decline in revenue to $7.9 billion and adjusted earnings per share dropping from $1.79 to $1.43. This outlook is attributed to inventory reductions in consumer markets like smartphones. However, management expects this adjustment to be brief, with customer inventories normalizing by spring and stronger shipments in the latter half of fiscal and calendar 2025.

AI Growth Potential

Micron is well-positioned to benefit from the AI boom, particularly through its HBM products essential for AI applications. The company projects the addressable market for HBM to grow from $16 billion in 2024 to $64 billion in 2028, and to $100 billion by 2030. Maintaining its market share could result in substantial revenue increases in this segment over the next several years.

Valuation

Currently, Micron trades at a forward price-to-earnings ratio of approximately 10, making it more affordable compared to other AI and semiconductor stocks. While short-term challenges exist, the company’s strategic position in the AI market and potential for significant growth make it a compelling option for investors seeking exposure to the AI sector.

Conclusion

Micron Technology’s recent stock decline presents a potential buying opportunity for investors. Its strong foothold in the AI-driven data center market, combined with expected growth in HBM demand, positions the company for future success. While short-term market fluctuations are a consideration, Micron’s long-term prospects in the expanding AI landscape make it a noteworthy candidate for investment.