Micron Technology (MU 1.16%) isn't the hottest name in the semiconductor sector these days. After all, plenty of chip stocks get more attention than the integrated memory-chip maker, including Nvidia, Advanced Micro Devices, and Intel, but it's a mistake to overlook Micron's potential.
Microsoft's new $17.4 billion deal with Nebius Group for AI infrastructure is a reminder that there is still plenty of runway in the AI and chip sectors, as that $17.4 billion is going to be spent on hardware so that Microsoft Azure can handle the strong growth it's seeing for AI workloads and other computing infrastructure.
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Micron doesn't make GPUs, but it does supply another key component for AI programs, high bandwidth memory (HBM), and it's seeing strong growth in that category. In its fiscal third quarter, which ended on May 29, the company said that HBM revenue grew nearly 50% sequentially, driving data center revenue to more than double year over year in the quarter. Overall revenue was up 37% year over year, and its adjusted operating margin nearly doubled.
In addition to its momentum, Micron has an advantage as one of the few American semiconductor companies to manufacture chips domestically. That already helped the company earn more than $6 billion from the CHIPS Act, and it's likely to give it preferred status with the Trump administration.
The biggest reason why Micron could soar
Micron is clearly seeing strong momentum, and there seems to be considerable runway in AI. However, the most attractive part of the stock is its valuation. Micron stock currently trades at a forward P/E of just 10, and earnings estimates for the stock have been moving higher.
We'll get an update from Micron later this month, and if the company impresses the market and beats estimates, we're likely to see double-digit gains from Micron, paving the way to more growth in the next three years.
