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It’s okay to say that Nasdaq chip stock Micron (NASDAQ: MU) is hot right now. Last year, it increased by almost 350% during the AI-related memory ‘supercycle’.
Now, I completely missed out on these explosive benefits sadly. Are tech stocks still worth buying for my ISA anyway?
Earnings
Last night (March 18), Micron posted its earnings for the second quarter of its 2026 fiscal year. And they opened doors beyond Wall Street’s expectations.
For the quarter, revenue came in at a record $23.86bn, up 196% year-on-year. Meanwhile, adjusted earnings per share came in at a record $12.20 – miles ahead of the consensus forecast of $9.31 – compared to $1.56 last year (+682% year-over-year).
Commenting on the earnings, CEO Sanjay Mehrotra said: “In the age of AI, memory has become a strategic asset for our customers.” He added that the company expects “significant records and in fiscal Q3.”
Closer to guidance, the company said in Q3, it expects revenue of $33.5bn plus or minus $750m (meaning year-over-year growth of more than 250%) and diluted earnings per share of $19.15 plus or minus $0.40. Analysts were expecting $12.05 in earnings per share on $24.3bn in revenue so this guidance was above estimates.
The stock still looks cheap
Clearly, Micron is benefiting from the AI boom. What is happening is that the demand for memory is increasing due to the high demand for popularized GPUs Nvidiawhich requires memory to power generative AI models.
The good news is that the stock still looks really cheap. Currently, it trades at a forward price-to-earnings (P/E) ratio of just 7.3 using the next fiscal year’s earnings forecast (which could rise given the company’s current momentum).
Note that several Wall Street firms raised their stock prices after last night’s earnings. Both JP Morgan and TD Cowen are targeting $550 – about 24% above the current share price.
What are the risks?
However, while there is much to be excited about here, there are a few dangers. Another is that the memory business is cyclical.
So, while Micron’s earnings are growing right now, things could change quickly. Note that in 2016, 2019, and 2023, Micron’s revenue is decreasing each year.
In the near term, the AI boom should support demand. But if the Big Tech companies stop spending on Nvidia’s GPUs, things could get worse.
Another issue is that Micron recently told investors that capital expenditures will “go up logically” in fiscal 2027 with construction-related costs rising to more than $10bn. This type of capex can be profitable.
Of course, after a 350% increase in the share price in the last year (the chart is parabolic and that scares me), there is always a chance that some profit will be taken at some point (maybe even today). This is another risk to consider.
My move now
All in all, I wouldn’t buy Micron stock just yet. I need to do some more research.
I want to get a better idea of the long term memory requirement. I also want to learn more about the company’s competitive advantage.
