The analyst who accurately predicted NVIDIA's rise in 2010 has now shared his top 10 stock picks, notably excluding Micron Technology.
Micron's position in the AI memory sector appears secure due to various structural factors: the production of HBM chips demands extensive cleanroom construction, customers currently receive only 50-66% of their requirements in the medium term, and the supply-demand dynamic is expected to remain constrained through 2026. This situation stands in stark contrast to the memory market downturn seen in 2018.
In its fiscal Q2 2026 report, Micron (MU) posted revenue of $23.9 billion, marking a staggering 196% increase year-over-year. Looking ahead, the company anticipates generating $33.5 billion in revenue for Q3 with a projected gross margin of 81%. Notably, Micron trades at a mere 7x forward earnings for FY 2027, a fraction of NVIDIA and Broadcom's 24x multiples, even though Micron is crucial for supplying the HBM memory that underpins AI infrastructure. The company also reported $6.9 billion in free cash flow last quarter, authorized a 30% increase in its dividend, and initiated volume shipments of HBM4, establishing multi-year customer agreements that replace the previous one-year contracts.
Investors are encouraged to consider Micron Technology (NASDAQ: MU) because the current 7x forward earnings multiple reflects a significant undervaluation for a key player in the AI memory market—a rarity amidst a megatrend. This discrepancy largely arises from lingering assumptions that "memory" relates solely to conditions from 2018.
The financial figures present a compelling narrative. Micron’s FY Q2 2026 revenue reached $23.9 billion, with a non-GAAP EPS of $12.20 and gross margins of 75%. For Q3, the company expects revenue of $33.5 billion and an EPS of $19.15, accompanied by a robust gross margin nearing 81%. Meanwhile, with shares priced at $884, the market is still treating Micron as if it's just another commodity DRAM provider poised for a downturn—when the reality is quite the opposite.
As this update circulates, it’s possible that Micron's valuation has exceeded $1,000 due to growing investor recognition of its undervalued stock in relation to its earnings. The accelerating rally heightens the fear of missing out (FOMO), which may push the stock even higher.
A stark valuation gap exists between NVIDIA, which trades at over 24x forward earnings for FY 2027, and Micron, the supplier of the HBM essential for their GPUs, which is currently valued at only 7x. CEO Sanjay Mehrotra highlighted that AI demand is expanding the total addressable market for DRAM and NAND data center bits to surpass 50% of the industry total for the first time in 2026, suggesting a long-term shift that the market has yet to fully reflect.
On the income front, cash flow is equally noteworthy. Micron generated $6.9 billion in free cash flow during Q2 FY2026, surpassing the previous record by 77%. With a balance sheet boasting $16.7 billion in cash and a net cash position of $6.5 billion, the company has recently approved a dividend increase of 30%. While the yield may seem modest, the upward trajectory and robust coverage are promising for long-term investors.
The momentum for Micron is fueled by its new HBM4 36GB 12-Hi chips tailored for NVIDIA’s Vera Rubin architecture, with HBM4E production expected to escalate in 2027. Furthermore, the firm has secured its first five-year strategic agreements, moving away from one-year contracts to long-term supply commitments. Analysts are rating Micron as a Strong Buy, reinforced by a newly updated UBS price target propelling expectations from $535 to $1,625.
Addressing concerns about market cyclicality, it's critical to highlight the unique conditions of the current environment. HBM production entails higher wafer usage than standard DRAM, and the cleanroom establishment process is lengthy, translating into years rather than months. Mehrotra emphasized that many prominent customers are only receiving between 50% and two-thirds of their demand in the near term. Importantly, supply conditions are projected to remain tight beyond 2026, distinguishing this cycle from the trajectory observed in 2018.
With a forward earnings multiple at 7x and hyperscaler orders extending through 2027, investors need not worry as Micron’s potential for growth appears solid. As market capital becomes increasingly available for AI investments, it's improbable that Micron's stock will peak in the near term.
