Micron's strong rebound: Stock price surges 12% driven by AI demand! But oversupply and competitive

Micron Technology (NASDAQ: MU), as a world-leading manufacturer of memory and storage chips, showcased a remarkable recovery performance in the fourth quarter of fiscal year 2024. The company’s revenue reached $7.75 billion, a year-on-year increase of 93%, and earnings per share exceeded expectations, reaching $1.18. Facing the continuous growth of AI and data center demand, especially driven by the enterprise-level SSD and high-bandwidth memory (HBM) markets, Micron has quickly regained its market position. As a result, in after-hours trading after the earnings release, the stock price rose by 12%.

Although Micron has experienced long-term market fluctuations and its stock price has fallen by more than 40% from its 52-week high, investor confidence is now recovering. However, the memory industry where Micron is located is highly cyclical and also faces threats from competitors such as Samsung and SK Hynix in the HBM3E market, as well as the potential risk of oversupply.

Therefore, the question is: In the future market environment, can Micron continue to maintain its current growth momentum, especially finding a balance between long-term growth driven by AI and short-term market competitive pressure?

Micron’s stock price rebound: Investor confidence returns

Micron Technology’s financial performance showed a strong recovery momentum in the fourth quarter of fiscal year 2024, not only helping the company emerge from the previous market downturn but also regaining investor trust. The report shows that Micron’s revenue reached $7.75 billion, a year-on-year increase of 93%, exceeding market expectations. This outstanding performance is mainly due to the strong growth in demand for data centers, especially the strong performance of high-bandwidth memory (HBM) and enterprise-level solid-state drives (SSD) sales.

Management mentioned that enterprise-level SSD sales exceeded $1 billion for the first time in this quarter, indicating that the rapid expansion of AI infrastructure provides important support for Micron’s business growth.

In after-hours trading after the earnings release, Micron’s stock price rose sharply by 12%. This reaction highlights investor confidence in the company’s future growth potential. Previously, due to the uncertainty of the global memory market and concerns about oversupply, Micron’s stock price had fallen by more than 40% from its 52-week high. However, the release of this earnings report marks an important turning point, and investors have re-recognized Micron’s long-term growth potential driven by AI and data center demand.

More importantly, Micron gave an optimistic outlook for the first quarter of fiscal year 2025, expecting a median revenue of $8.7 billion and earnings per share expected to be $1.74, much higher than the same period in 2024.

This strong guidance further alleviates market concerns about a decline in memory demand, indicating that even though demand in the consumer market remains weak, the demand for high-value products related to data centers and AI is sufficient to support the growth of the overall business. In particular, the rapid development of cutting-edge technologies such as generative AI is expected to continue to drive the expansion of the memory and storage markets in the coming years.

Another important factor in this round of stock price rebound is the market’s improved expectations for the supply chain inventory situation.

As inventories in the consumer market are gradually digested, the market expects that in the second half of 2025, Micron’s all product lines, especially DRAM and NAND shipments and average selling prices will increase. As a result, gross margins have also improved significantly. The gross margin in the fourth quarter reached 36.5%, a significant increase of 8.4 percentage points compared to the previous quarter.

This performance makes investors look forward to profit expansion in the coming quarters, especially when capital expenditures gradually return to normal. In addition, investors can use the multi-asset wallet BiyaPay to regularly check Micron’s market trends and choose the best trading timing.

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Combined with Micron’s comment on “achieving significant revenue records and significantly improved profitability in fiscal year 2025”, it is not surprising that the market is excited about the upcoming recovery of this memory company.

It is generally expected that MU will achieve accelerated recovery after the trough in fiscal year 2023/2024. By fiscal year 2027, its top-line/bottom-line compound annual growth rate is expected to reach +21.2% / +103.1% respectively.

Otherwise, from fiscal year 2019 to fiscal year 2027, its normalized compound annual growth rate will be +8.4% / +7% respectively.

Can AI-driven growth make up for the weakness of the consumer market?

Although Micron Technology performed strongly in the fourth quarter of fiscal year 2024 and showed great growth potential driven by AI and data center market demand, the weakness of the consumer memory market remains a challenge that cannot be ignored.

In the past year, consumer demand for DRAM and NAND products has declined, especially the weakness in the personal computer and smartphone markets, putting certain pressure on Micron’s overall shipments and average selling prices (ASP). However, Micron’s continuous growth in AI and enterprise-level demand may be sufficient to make up for this short-term weakness.

In Micron’s business, high-end products related to AI and data centers, especially high-bandwidth memory (HBM) and enterprise-level solid-state drives (SSD), have become the main growth drivers.

The rapid popularization of generative AI and the demand for computing power in data centers are continuously driving the shipment volume of HBM products. It is expected that this trend will continue to accelerate in the coming years.

This market is not only lucrative but also an expanding market opportunity for Micron. In fact, Micron has stated that NAND revenue in the fourth quarter has broken records, and enterprise-level SSD quarterly sales exceeded $1 billion for the first time, indicating that data center demand is sufficient to offset the weakness in the consumer market, especially as the construction of AI infrastructure has become the core driving force for the growth of storage demand.

Micron’s guidance for the first quarter of fiscal year 2025 shows that the strong performance of the AI and data center markets is expected to continue to drive its revenue growth, especially in high-margin product lines. However, the weakness in demand for consumer-level DRAM and NAND remains a major concern in the market, especially when inventories are not completely digested. This weak demand has affected Micron’s performance in the more popular consumer goods market. However, as inventories are gradually digested, the consumer market is expected to gradually recover in the second half of 2025.

The expected recovery of consumer products will bring two levels of improvement: one is the growth in shipments, and the other is the rebound in average selling prices.

As the market demand for products such as PCs and smartphones warms up, Micron is expected to promote the recovery of DRAM and NAND in the consumer market through inventory clearance and product upgrades. In the field of high-bandwidth memory (HBM), as Micron gradually establishes its leadership in the HBM3E market, the company will further increase its profit margin in the high-value product market.

Nevertheless, investors still need to be vigilant about short-term fluctuations caused by the weakness of the consumer market, especially in the context of high global economic uncertainty. The weakness in consumer demand may suppress the company’s shipments and selling prices of some products in the short term. But in the long run, with the continuous growth of demand for AI infrastructure and the gradual recovery of the consumer market, Micron has the ability to achieve more comprehensive growth in the second half of 2025.

Market risks: When will oversupply and competitive pressure emerge?

Although Micron Technology’s strong performance in the fourth quarter of fiscal year 2024 boosted market confidence and showed continuous growth potential driven by AI and data center demand, the potential risks of oversupply and market competition remain key issues that investors need to be vigilant about. In particular, powerful competitors such as Samsung and SK Hynix are accelerating their entry into the high-profit HBM3E market, which exacerbates market uncertainty.

The risk of oversupply gradually emerges and competitive pressure intensifies

The memory market where Micron Technology is located is highly cyclical, and fluctuations in supply and demand may cause drastic price fluctuations.

Currently, due to strong demand for AI and data centers, the market supply is relatively tight, driving up the average selling price (ASP) of Micron’s products. However, as industry competitors increase production capacity, especially Samsung’s efforts in the HBM3E market, market supply may increase rapidly, leading to potential oversupply risks.

The oversupply problem may become more obvious in the next few fiscal years, especially from the second half of 2025 to 2026. Although demand remains strong currently, analysts are worried that as more manufacturers increase their capacity expansion for HBM and NAND, market prices may be affected.

Micron’s management mentioned in the earnings report that although demand remains healthy currently, they are aware of the potential risk of increased market supply in the future, especially in the memory market related to data centers and AI servers.

Samsung’s upcoming entry into the HBM3E segment is expected to exacerbate competitive risks as Micron and its peers are all competing for market share. Therefore, Micron’s outstanding performance in the market recently is not surprising. It has reached a turning point and attracted bargain hunters to return.

Micron is stepping up efforts in the key HBM3E field to seize more market share from SK Hynix. This field is evaluated as a two-horse race between Micron and SK Hynix. Therefore, a quick market entry is crucial for Micron’s success in potentially disrupting SK Hynix’s leadership.

I believe Micron’s confident outlook and solid profitability confirm the upward cycle of its core business, especially in artificial intelligence servers (Al servers). In addition, the ongoing transformation to artificial intelligence personal computers (Al PCs) and artificial intelligence smartphones (Al smartphones) should diversify the concentration risk of its data center business and further drive Micron’s growth turning point.

Given the cyclical nature of Micron’s business, I am satisfied with management’s assurance that the demand/supply dynamics are expected to remain healthy.

However, investors must carefully examine the accumulation of downstream inventories, even as their customers expect stronger sales when preparing for new product launches and product updates. In addition, there are concerns about whether the potential oversupply situation in the HBM market will worsen as Samsung steps up its efforts to regain market leadership from SK Hynix.

Although I am cautious, given the strong demand drivers from data center customers, unfavorable price dynamics have not been evaluated currently. However, investors must be prepared for the potential oversupply risk in fiscal year 2026 unless we see a significant increase in corporate artificial intelligence infrastructure investment and a surge in demand from sovereign artificial intelligence (Sovereign Al) opportunities.

Uncertainty in future market supply and demand dynamics

Although AI-driven memory demand continues to grow in the short term, there is still some uncertainty about the sustainability of long-term demand.

Micron’s management mentioned in the earnings report that a new oversupply situation may emerge in the market by 2026 unless corporate AI infrastructure investment further increases. Analysts are also cautious about this and point out that if demand in the memory market fails to continue to grow in the next few years, it may lead to a decline in prices and a contraction in profit margins.

In addition, whether the demand for enterprise-level SSDs and NAND markets can continue to grow directly affects Micron’s revenue performance. Although Micron’s enterprise-level SSD sales exceeded $1 billion in the fourth quarter, it remains to be seen whether this can be maintained in the long term. If consumer market demand fails to recover and enterprise demand growth slows down, the market may face further downward pressure.

Valuation remains attractive: Should you buy, sell or hold Micron?

Current valuation analysis: The attractiveness of PEG and P/E

Micron’s valuation is still below the industry average from the perspective of price-to-earnings ratio (P/E) and PEG (price-earnings-to-growth ratio). According to analysis, Micron’s PEG (non-GAAP) ratio is only 0.18, showing a significant undervaluation relative to its future growth potential. In contrast, the industry average PEG value is 1.93, while Micron’s major competitors such as Samsung and SK Hynix have PEGs of 0.34 and 0.14 respectively.

This data indicates that Micron’s investment value in the memory market recovery cycle is still significant. Based on Micron’s expected growth in fiscal years 2025 and 2026, the current valuation undoubtedly provides investors with a good opportunity to enter this stock.

In addition, Micron’s forward price-to-earnings ratio (FWD P/E) is 12.34 times, far lower than the industry average of 24.48 times. This shows that although Micron’s stock price has risen after the earnings release, its valuation is still attractive and has a large upside potential. Combined with the company’s continuous increase in gross margin and increase in free cash flow, the current valuation level provides a good buying opportunity for investors.

It is worth noting that although Micron’s stock has recently shown a “golden cross” upward trend after breaking through the 50-day and 200-day moving averages, there are still concerns about its short-term fluctuations in the future. Analysts point out that Micron’s stock price has been stable near the $85 support level since August 2024 and broke through the $115 resistance level after the release of the fourth quarter fiscal year 2024 earnings report.

However, as market sentiment gradually improves, Micron’s stock price may face certain profit-taking pressure in the short term. In fact, the recent buying momentum has weakened, and some investors have taken profits near the $115 resistance level.

In this context, it is recommended that investors closely monitor short-term stock price fluctuations and wait for more attractive buying opportunities. Analysts suggest that the market may experience a small correction in the coming weeks, especially driven by the current optimistic sentiment and high volatility. Therefore, when the stock price pulls back to the range of $95-$100, it is a good time for investors to re-enter the market.

Buy, sell or hold?

According to market analysis, Micron Technology’s stock is still attractive, but whether to buy, sell or hold depends on the investor’s risk tolerance and market strategy. Referring to the viewpoints in the article you provided, Micron’s valuation advantages and future growth potential are clearly visible, but there are also risks of short-term market fluctuations.

Buy

For investors seeking long-term growth opportunities, Micron’s current valuation is relatively low. The PEG and P/E ratios show strong growth potential in the next few years. The continuous increase in AI and data center demand, especially the market expansion of HBM and enterprise-level SSD products, will become the core driving force for the company’s earnings.

It is recommended that investors consider buying when the stock price pulls back to the range of $95-$100 to ensure a better margin of safety.

Hold

If investors already hold Micron’s stock, the market growth trend supports continued holding.

Although there are competitive pressures and potential risks of oversupply in the market, with the rise in demand for generative AI and enterprise AI infrastructure, Micron’s long-term prospects are still optimistic. Investors expect to obtain good returns through margin improvement and capital return (such as stock buybacks) in the next few years.

Sell

For investors who are more inclined to short-term profits, considering the potential risks of oversupply and intensified competition, especially in the context of Samsung and SK Hynix further expanding production capacity, the market may experience fluctuations in the short term. If investors are intolerant of short-term market fluctuations or are cautious about intensified industry competition, they can choose to gradually reduce their holdings after the recent rebound to lock in some profits.

From a valuation perspective, Micron Technology’s current PEG and P/E ratios indicate that its stock is still relatively undervalued, providing investors with a good opportunity to enter.

It is recommended that investors pay attention to stock price fluctuations, especially when the stock price pulls back to the range of $95-$100, and seek better margin of safety for investment layout. This can reduce the risks brought by short-term market fluctuations while enjoying long-term growth dividends.

In general, driven by AI and data center demand, Micron Technology has long-term growth potential. Although there are supply chain and competitive pressures, future market opportunities are still worthy of investors’ attention. Investors who can withstand short-term fluctuations and enter Micron Technology at an appropriate price range will obtain considerable returns in the next few years.