Wall Street’s fixation with short-term stock performance over long-term investment potential often creates opportunities for the private investor to beat the so-called professionals. For the guy on Main Street, the point of investing is to build wealth over the long term, not to beat some arbitrary investment benchmark. Investment returns should be measured in years, not quarters. Last week, Wall Street created yet another opportunity in this vein.
Micron is an American company headquartered in Boise, Idaho. It designs and manufactures computer memory and storage products. Specifically, Micron is a global leader in manufacturing “high bandwidth memory” semiconductors that are an essential component of the artificial intelligence revolution.
Nvidia’s ultra-fast semiconductors have created an AI frenzy. The world’s largest technology companies, all American, are rapidly building data centers to process the information that forms the basis for AI. Nvidia’s chips are at the heart of the AI data centers, but AI also requires HBM semiconductors. No HBM chips, no AI. HBM chips sit next to Nvidia’s semiconductors on a silicon substrate. The two types of chips are wired together with interconnects.
Only three companies manufacture the HBM semiconductors required for AI: Micron in the United States and SK Hynix, as well as Samsung, in South Korea. Manufacturing the HBM chips for AI is a high margin, very proprietary and a high-growth business.
However, Micron also produces memory chips for the personal computer and cellphone markets. This part of Micron’s product line is neither high growth nor high margin. It is cyclical. Today, there is an excess inventory of Micron’s commodity memory products. This temporary excess supply caused Micron to issue soft guidance for its next financial quarter. In response, Wall Street buried the stock, down 20%. It is inexplicable that the stock sold off even though the inventory glut should be over in a matter of months.
Micron’s high-margin, high-growth HBM semiconductor product is growing at triple-digit rates. In Micron’s latest quarter, which ended in November, revenues for HBM memory were up 400% year on year and 40% quarter on quarter. The HBM product line is now over half of Micron’s revenues. This line is sold out for all of 2025. Importantly, technology experts say demand for AI chips, including derivative chips such as HBM semiconductors, should remain strong for the balance of the decade, maintaining a 25-30% annual growth rate into 2030.
Looking out to Micron’s next fiscal year, which begins at the end of August 2025, the stock appears to be extraordinarily cheap, with earnings estimates above $13 a share. The stock is selling at around 7 times forward estimates with a projected 5-year growth rate of 25%. If that sounds like a great bargain, it is a bargain.
However, too many traders on Wall Street don’t care about the future, they only care about tomorrow and their performance against arbitrary benchmarks. That is particularly the case toward the end of calendar years.
No one knows how the stock will trade until the end of the year, but 2025 and beyond offer a great opportunity for Micron to be a global leader in the AI technology food chain. Don’t listen to the noise on Wall Street. Pay attention to fundamentals: buy low and sell much higher a few years out.
The writer owns shares in Nvidia.
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James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be reached at [email protected]