After a 77% surge in a single month, Micron's P/E ratio is still less than half of Nvidia's.
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Micron Technology’s stock price is experiencing the strongest monthly rally in nearly 40 years, but analysts point out that even so, the valuation of this chip stock remains low.
Micron’s stock has surged more than 77% in May, poised to record its biggest monthly gain since December 1987. Despite the sharp rise, its forward price-to-earnings ratio remains below 10x, less than half that of Nvidia, and only a little more than a third of the implied P/E ratio for the Philadelphia Semiconductor Index.
Several analysts told MarketWatch that the robust demand for memory chips in the AI era is reshaping market logic, and Micron still offers a high cost-performance advantage in this round of AI infrastructure wave.
However, some analysts remain cautious about the long-term outlook, believing that cyclical adjustments on the supply side are still a potential risk.
Sharp Rally, Still Low Valuation
Micron’s stock rose 3.6% on Wednesday, extending the previous session’s historic single-day 19.3% gain and once again hitting record highs. Since May, the cumulative gain has reached 77%; if maintained through month-end, it will mark the biggest monthly gain since December 1987 (when it rose 78.8%).
Nevertheless, Catalyst Funds Chief Investment Officer and Portfolio Manager David Miller told MarketWatch that despite Micron’s “dramatic surge,” its forward earnings valuation is still less than 10x. “Interestingly, even after such a strong rally, it can still be considered a value investment opportunity in some sense,” he said.
In contrast, according to FactSet data, Nvidia’s stock trades at 21 times expected earnings over the next 12 months, while the implied P/E ratio for the Philadelphia Semiconductor Index is as high as 26.4 times.
AI Reshapes Memory Market Logic
D.A. Davidson analyst Gil Luria told MarketWatch that investors are realizing that memory chips are the “only” sector in the entire AI trade being traded at a reasonable valuation.
He pointed out that the memory market in the AI era is vastly different from a few years ago, due in part to a limited number of players and the lengthening of contract cycles. More critically, the memory market is undergoing “de-commoditization”—some high-bandwidth memory products are co-designed with Nvidia, specialized for its latest products, so they are “no longer interchangeable.” This has prompted Nvidia and other hyperscale cloud providers to shift to long-term contract purchases instead of on-demand buying.
David Miller also said Micron presents an opportunity to participate at reasonable prices in the memory track of AI’s long-term buildout, adding that “the company’s backlog far exceeds its supply capacity.”
Supply Cycle Risk Cannot Be Ignored
Not all analysts are optimistic about Micron’s outlook. Morningstar analyst William Kerwin said he still has doubts about the stock’s long-term prospects, as adjustments on the supply side could disrupt the current optimistic narrative.
“We remain skeptical... We think AI is driving a long and sustained up cycle, but it’s ultimately a cycle,” Kerwin said. He warned that there will be a “large amount” of new capacity coming online between late 2027 and 2028, which could be a catalyst for memory chip prices and Micron’s stock to turn downward.
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