Micron Technology has fallen as much as 39% from its high since late June as investors sell off semiconductor stocks over AI spending and macroeconomic concerns. Chip prices are still climbing, and Micron's management doesn't expect the memory shortage to ease until 2028 at the earliest. Based on how the stock has historically priced through earnings cycles, a $5,000 investment today could be worth about $6,750 by mid-2028.
Micron's slide tracks the broader chip sell-off
Micron Technology's stock has fallen as much as 39% from its high since late June, swept into a broader sell-off across semiconductor stocks. The decline reflects concerns about returns on AI spending and macroeconomic trends.
Yet Micron's earnings have surged in recent quarters as hyperscalers pay premium prices for its memory chips, one of the biggest bottlenecks in scaling large language models. Chip prices climbed more than 60% on average during Micron's fiscal third quarter, which ended May 28, versus three months earlier.
Supply won't catch up before 2028, Micron says
Hyperscalers have committed hundreds of billions of dollars in capital expenditures this year and signed contracts for hundreds of billions more in chips, infrastructure and energy services ahead. That demand outstrips supply industrywide, and Micron's management doesn't expect the shortage to ease until 2028 at the earliest.
But more supply is on the way. Micron plans to spend more than $250 billion on new manufacturing capacity over the next decade, and its Virginia facility recently began producing legacy DRAM chips. Its first Idaho plant is due to produce high-end chips by mid-2027, a second Idaho facility follows in late 2028, and a New York site that broke ground this year could start production in 2030.
Competitors are racing to keep pace. SK Hynix and Samsung together plan to spend more than $1.3 trillion on production facilities over the next decade. Chinese rival CXMT recently raised up to $10 billion in an IPO to expand its DRAM output.
As that capacity arrives, price increases will slow and costs will rise, which will lead to an earnings decline.
What a $5,000 stake could be worth by 2028
Analysts expect Micron's earnings to peak in 2028 at about $178 per share, nearly 2.5 times the amount estimated for fiscal 2026. Micron shares have historically traded between three and eight times earnings depending on the cycle. Long-term agreements covering about 20% of its DRAM volume and a third of its NAND volume from last quarter put a floor under future pricing.
A multiple in the middle of that range, five or six times earnings, would put Micron's share price at about $1,000 by mid-2028. With the stock recently trading around $740 per share, a $5,000 investment made now could be worth about $6,750 in two years.
According to Motley Fool analyst Adam Levy: "I want a wider margin of safety" before buying Micron shares, given the uncertainty the company faces. Investors who think the cycle could run longer, or the downturn won't be severe, may see this as a chance to add shares.
Source: Motley Fool
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