When it comes to artificial intelligence (AI) chips, most investors typically think about the graphics processing units (GPUs) designed by Nvidia (NVDA -2.87%) and Advanced Micro Devices (AMD -4.02%). GPU sales have soared for both companies over the last couple of years, and in Nvidia's case, they have added trillions of dollars to its market capitalization.
But Micron Technology (MU -1.92%) also deserves recognition for its memory and storage chips, which are increasingly important for AI workloads in data centers, personal computers, and even smartphones. The company just released financial results for its fiscal 2025 third quarter (which ended May 29), revealing a continued surge in demand for AI-related memory capacity.
Micron stock is up 42% in 2025 already, but here's why it might still be a screaming buy.
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Demand for memory capacity is soaring
Data center GPUs are designed for parallel processing, which means they can perform several computations simultaneously and handle the enormous data sets required to deploy AI models. But these workloads also need high-bandwidth memory (HBM), which stores information in a ready state so it can be called upon by the GPU at a moment's notice.
Micron's HBM3E solution for the data center leads the industry in performance and efficiency. In fact, Nvidia selected it to power its latest Blackwell and Blackwell Ultra GPUs, and Advanced Micro Devices (AMD) will also use it in its upcoming MI355X GPUs. Micron is now gearing up to produce commercial quantities of its new HBM4 data center solution next year, which will deliver a 60% performance boost over HBM3E and consume 20% less power, making it ideal for next-generation "reasoning" AI models.
Micron estimates its addressable market for data center HBM will be worth $35 billion this calendar year, and expects that figure to soar to $100 billion by 2030, so there is an enormous opportunity ahead for the company.
But some AI workloads are now being processed on personal computers (PCs) and smartphones without the need for external computing capacity from data centers. This trend will accelerate as chips become more powerful, and it's already driving up demand for DRAM (memory). Micron says AI-enabled PCs typically require a minimum DRAM capacity of 16 gigabytes, compared to 12 gigabytes for their non-AI counterparts, and AI smartphones are commanding a similar increase in capacity.
Micron's data center revenue surged in the third quarter
Micron generated $9.3 billion in total revenue during the fiscal 2025 third quarter, ended May 29. It was a 37% increase from the year-ago period, and it was also comfortably above the high end of management's guidance range, which was $9 billion. But the real growth story lies beneath the surface of the headline number.
Micron's compute and networking segment, which is where it accounts for its data center HBM sales, delivered $5.1 billion in revenue, which was a whopping 97% increase from the year-ago period. Revenue from the mobile segment came in at $1.6 billion, and while that was down 2% year over year, it represented growth of 45% sequentially (compared to the second quarter of fiscal 2025 three months earlier).
Micron's soaring revenue also led to a strong result at the bottom line during the quarter. Its generally accepted accounting principles (GAAP) earnings per share (EPS) soared by an eye-popping 460% year over year to $1.68.
Looking ahead to the fourth quarter (which will end Aug. 31), Micron is forecasting a record $10.7 billion in revenue along with $2.29 in EPS, which would represent year-over-year increases of 38% and 190%, respectively.
Why Micron stock is a buy now
Despite its 42% gain in 2025 so far, Micron stock is still relatively cheap. Based on the company's trailing-12-month EPS of $5.55, the stock is trading at a price-to-earnings (P/E) ratio of 22.5. That's a 55% discount to Nvidia stock, which currently trades at a P/E ratio of 50.9:
NVDA PE Ratio data by YCharts
Considering Micron's HBM3E solution is integrated into all of Nvidia's latest GPUs, Micron's data center sales should grow in lockstep with Nvidia's data center sales from here. When you also factor in the potential demand from AMD for its latest GPUs, and demand for memory from AI PC and smartphone manufacturers, it's reasonable to conclude that Micron stock deserves a higher valuation.
As a result, Micron stock could be a great buy right now, especially for investors who already own Nvidia and AMD and are looking to diversify their AI semiconductor holdings.
