Micron Soars 77% in a Month, Setting a Record for Nearly 40 Years, Yet Future P/E is Still Less Than Half of NVIDIA's

Micron Technology has been the third best-performing stock in the S&P 500 this year, with a 77% gain in May alone, potentially setting a record for the largest monthly increase since December 1987, with its stock price having risen over 1000% since the end of 2024. On Tuesday alone, it surged by 19.3%, marking the largest daily increase since November 2011. However, coexisting with this astonishing surge is its lowest valuation multiples in the Philadelphia Semiconductor Index—only slightly more than 10 times the forward price-to-earnings ratio, less than half of Nvidia's 21 times, and just over one-third of the implied price-to-earnings ratio of 26.4 times of the Philadelphia Semiconductor Index.

This contradiction is引发ing a deeper question in the market.

John Porter, Chief Investment Officer at AGF Investments, said bluntly: "Low valuation is almost a contrarian indicator, worrying because it implies that the next step for the profit story is to weaken." He added, "Judging the top on such a momentum stock is the hardest thing to do."

There is historical logic behind this contradiction. Memory stocks have always been seen as commodity suppliers, with the valuation pattern being: the cheapest at the top of the earnings cycle, and the most expensive at the bottom. Micron's revenue nearly tripled in the most recent quarter, setting the fastest pace since 1990—according to historical patterns, the more impressive the earnings, the closer they are often to the cycle's peak, and the low valuation is the pricing reflection of this expectation.

But the crux of the debate is: Has AI capital expenditure fundamentally changed the cyclical nature of the memory industry? Analyst Gil Luria from D.A. Davidson proposed the key argument of "de-commoditization"—some high-bandwidth memory products are co-designed with Nvidia and specifically adapted for its latest products, "no longer interchangeable," prompting Nvidia and hyperscale cloud providers to shift towards long-term contract procurement rather than spot purchases.

David Miller, Chief Investment Officer at Catalyst Funds, said that Micron represents an opportunity to participate in the memory track for long-term AI construction at a reasonable price, "the company's order backlog far exceeds its supply capacity", "even after such a strong rise, it can still be seen to some extent as a value investment opportunity".

Analyst Timothy Arcuri from UBS holds the most optimistic judgment, giving the highest target price on the street of $1625, implying a 75% upside from the current price, with the valuation basis being about 15 times forward price-to-earnings ratio. He believes Micron deserves a valuation ratio similar to Nvidia, "AI represents the kind of enduring, structural change that supports the valuation system to shift towards a broader semiconductor multiple."

There are also reasons to be bearish. Analyst William Kerwin from Morningstar explicitly warned that there will be "a lot" of new capacity coming onstream between the end of 2027 and 2028, which could become a catalyst for a downturn in memory chip prices and Micron's stock price. "We think AI is driving a long and sustained upcycle, but ultimately it is a cycle." The 14-day RSI has entered the overbought territory, and the average analyst target price of $697 implies a drop of about 24% from the current level, one of the weakest implied returns among semiconductor stocks.

Andrew Rocco, strategist at Zacks Investment Research, warned: "Micron seems about to experience a climax pattern, usually extreme technical indicators appear before the fundamentals weaken."

Porter's summary may be the most fitting: "The AI capital expenditure cycle is unprecedented, we have no script to follow. The broad cycle framework still holds, but the range of outcomes is so wide that one could drive a city into it. An epic collapse could happen, but scenarios where any pullback is relatively short-lived and less painful are also reasonable."