r/valueinvesting
The case for MU being a value investment
MU is a cheap AI play with locked-in HBM demand through 2028 and a surprisingly low forward P/E compared to peers.
- HBM demand is locked in through 2028 with long-term contracts making the business model highly predictable.
- AI models hitting a 'memory wall' creates inelastic demand, allowing Micron to command premium pricing.
- Forward P/E of 27 is a massive disconnect from its growth rate, making it a genuine bargain compared to bloated AI peers.
The demand for memory isn't just a temporary spike; it’s locked in for the next few years. We’re talking about HBM chips that are already sold out for 2026 and major contracts stretching well into 2028. Every single AI model out there is hitting a "memory wall," which means companies are desperate to pay whatever they have to just to get their hands on enough supply. When you have that much demand and a business model that is finally becoming predictable because of these long-term agreements, it’s hard to justify why the valuation is still this cheap.
I want to highlight the low PE of 27. the forward P/E ratio is still surprisingly low which feels like a massive disconnect from how fast the business is actually growing. Most other AI plays are trading at these huge, bloated multiples, but Micron is sitting there looking like a genuine bargain if you’re looking at what they’re actually going to earn over the next year or two. What are your thoughts?
Are hyperscalers obligated to spend a set amount of billions per quarter/year? It would seem MU would get a huge correction at the first sign of capex reduction.
There will be a capex reduction if the hyperscalers stock prices keep getting trashed in favour of memory.
They’re not obligated but pulling back on Capex would be quite a retreat, and it’s not clear what alternative they would be pursuing. Regardless of what skeptics say today, AI has too much proven potential to not be considered a potential competitive edge where none of these companies can afford to lose ground to another by sitting out: that’s why why they all dove in together.
I would say it’s all about narrative, big tech can easily claim that their advance AI models only use a fraction of the memory and their stock will shoot up.
You’re right, but you’re going see people here do Olympic level mental gymnastics to say you’re wrong, and then they’ll turn around and buy Adobe and Intuit.
Riiiiight.
Because eventually...all person, places, and things will be RAM as far as the eye can see. Trend never stop.
Value is when something is worth less today than it will be in the future. If you don’t understand just how undervalued Micron is, you should do some research. It is worth half what it will be in a year.
Where did you do this research?
I'd agree it's not a temporary spike, and happen to own a fuckload of it. I'm a CFA charterholder, have been a professional analyst, currently work at an AI company working on the automation process, and I recently built out my financial model on MU.
All that said, you should really check out this book: This Time Is Different: Eight Centuries of Financial Folly. Just because a cycle gets stretched doesn't turn this from a cyclical stock to a staples business.
Memory has a long history of cyclical busts, but there are two main kinds:
- Supply-led price collapses: bit demand still grows, but new capacity/cost reductions outrun demand. ASPs and revenue fall anyway.
- True demand + inventory crashes: PCs, phones, servers, or cloud customers slow purchases, then aggressively liquidate inventory. This is much worse because volume, price, and utilization all fall together.
The worst modern example: Micron’s FY2022 to FY2023 revenue fell 49%, gross margin fell 54 percentage points from 45% to –9%, and net income swung from +$8.7B to –$5.8B.
If you really think this can't happen again.. you're off your rocker.
We happen to be in a beautiful period for the company though. The infrastructure buildout is being funded by some of the strongest balance sheets in the world (hyperscalers), capital is cheap and plentiful, which means that companies losing fuckloads of money (ahem openai) can also get their hands on money and bid the prices of input up further.
But uhh to state the obvious, one day, investors will ask hyperscalers et al.. why'd you spend all that money? what'd you get out of it? was it worth it?
Why is it not a temporary spike? Why is this not just a super cycle? It feels like an industry that will get the shit kicked out of it in a few years when the greatest demand surge in history starts to normalize
Micron’s earnings should scare the fuck out of people more than it has. These 4 companies have patents + decades of experience required on possibly the greatest bottleneck in human history. They can force however much capex they want from big tech from here. This is NOT good. 30% of all hyperscaler capex has been spent on memory. Earnings players are saying they will be able to improve margins and raise prices even more, Anthropic / OpenAI and big tech execs are definitely trying to price this in.
I’m still long AI, but yes this will squeeze big tech dry
Amkor/ASE sell assembly-and-test as a service, whereas Micron’s back end is a captive step in selling a much higher-value memory product. In other words, Micron keeps the highest value packaging business internal. That's called HBM cube assembly (stacking and testing DRAM dies into an HBM product).
AMKR and ASE then complete system level advanced packaging, eg, integrating an ASIC/GPU and several HBM stacks from Micron. This is essential, but a much lower margin business. Amkor’s full-company 2025 gross margin was 14.0% and operating margin 7.0%; ASE’s core ATM business is much larger and includes packaging and test, but it also does not disclose a clean “HBM packaging margin.”
China already makes cheap DDR4/5 but that's not what AI uses or what's driving their margins. They would need to get access to advanced ASML lithography to start an HBM factory.
Micron's forward PE is estimated 7-15. Trailing PE is 25. The financials and earnings you would show it is undervalued at its current price and HBM margins are almost guaranteed until 2028.