Memory chip specialist Micron Technology (NASDAQ: MU) has seen its shares drop about 24% from their all-time high of 1,255. That might seem like a lot, and you might find yourself feeling sorry for its shareholders, but don’t — because Micron’s shares are actually up 445% over the past year — more than quintupling their value in that short period.
It’s more important how the stock might perform going forward, though. We can’t know for sure, but let’s make an educated guess about how a $10,000 investment in Micron Technology today might grow for you in, say, four years — by late 2030.
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What’s going on with Micron?
Micron’s surge is largely due to the explosion of artificial intelligence (AI) operations and the many data centers needed to facilitate it. All that infrastructure requires memory chips!
Crunching numbers
In Micron’s record-breaking fourth quarter, it posted net income of $37.7 billion, up 1,077% year over year. For the whole year, net income was up nearly 900% to $85 billion. Wow.
Can we expect Micron’s stock to grow by 900% annually over the coming four years? Well, it might, but I wouldn’t count on it. Better to hope for the best but make more conservative assumptions.
If you invest $10,000 in Micron and its stock grows by, say, 200% annually (that is, it triples in value each year), your stake would be worth a whopping $810,000 in four years. (It will go from a value of $10,000 to $30,000 to $90,000 to $270,000 to $810,000 progressively.)
That assumes the torrid rate of growth continues for data center construction and AI. The growth rate is almost certain to slow. If your stake merely doubles annually, you’ll go from $10,000 to $20,000 to $40,000 to $80,000 to $160,000 in four years — still rather amazing. If Micron’s growth really slows and averages only, say, 25% growth annually, you’ll end up with a position worth more than $24,000 — which is also an excellent gain.
Keep in mind
Here are some more factors to consider:
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Micron’s stock, in some investors’ eyes, is somewhat overvalued, with a recent price-to-sales ratio of 8.5, well above the five-year average of 3.9. Some see it as undervalued, though, with its forward-looking price-to-earnings (P/E) ratio, recently 5.5, way lower than its five-year average of 11 — and both of those numbers are quite low for a fast-growing company.
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The company is really ramping up its stock buyback plans, having recently authorized up to $35 billion more in buybacks. Based on its current market value of $1.08 trillion, that’s about 3.25% of the stock’s value. This will shrink the number of shares, leaving each existing share worth more.
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Micron is dominant, but Chinese company ChangXin Memory Technologies, or CXMT, threatens to challenge it with lower-priced chips.
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The boom in AI could slow a lot, perhaps due to new worries about it. Recently, Anthropic warned that “AI models may be capable of self-replicating without access to a datacenter” — including on home devices.
