It's going on four years since OpenAI's ChatGPT introduced the world to generative artificial intelligence (AI), and the megatrend shows no sign of slowing down. Shares of Micron Technology (MU +0.78%) initially lagged behind early winners like Nvidia, but they are now playing catch-up in spectacular fashion, with the stock up about 600% during the past three years.
Despite the explosive growth, Micron's shares still trade at a reasonable price compared to alternatives in the technology industry. Let's find out why the memory chip company still looks poised for success and try to predict where the shares might end up by the end of 2026.
Memory hardware is crucial for generative AI
The AI hardware story usually focuses on graphics processing units (GPUs) and other similar chips that do the brunt of the work of running and training large language models (LLMs). But behind the scenes, computer memory is needed to store the vast quantities of data needed to train LLMs while also providing the "working memory" these algorithms need to access information in real time and respond to user queries.
NASDAQ: MU
Key Data Points
According to analysts at Goldman Sachs, AI companies could make more than a half-trillion dollars in capital expenditures related to data centers in 2026 alone. Memory chip producers like Micron will likely capture a significant chunk of that spending. And the momentum has already begun.
Micron's fiscal first-quarter revenue jumped 57% year over year to $13.6 billion, driven by strength across all its operating divisions but particularly in its cloud memory unit, where it serves hyperscalers that use its hardware for generative AI workloads. The cloud memory business also has higher margins than the company's other divisions. And this trend is improving, with gross margins rising from 59% to 66% year over year.
Image source: Getty Images.
With a gross margin of 66%, the company's cloud memory division is quickly closing in on Nvidia, which has a total gross margin of about 73% across its divisions. And Micron's margins could continue to improve because of widespread memory chip shortages.
The Wall Street Journal reports soaring demand sent memory hardware prices up 50% in the fourth quarter of 2025 and could push them up another 40% to 50% by the first quarter of this year. While most of the demand is for higher-end AI-capable chips, it can also spike the prices of other types of memory hardware (used in cars and cellphones) as manufacturing capacity is diverted toward the more-premium offerings.
How much will Micron stock be worth by the end of 2026?
It is impossible to predict the future because things can change very quickly in financial markets. That said, the available data points to continued growth for Micron stock during the next 12 months as data center clients continue to scramble for computer memory hardware, driving up both revenue and margins. The best part is that the stock's current valuation doesn't fully price in these catalysts.
With a forward price-to-earnings ratio (P/E) of just 12, it still trades at a discount to the Nasdaq 100 average of 26, which seems far too low considering the company's recent success.
Investors may be giving Micron a discount because of long-held skepticism about investing in memory chip stocks due to industry challenges like commoditization (memory chips have a shallow economic moat), which leads to boom and bust cycles as supply eventually catches up to demand. However, management can mitigate the impacts of such challenges by using current cash flow for share repurchases that will keep earnings per share (EPS) high, even if memory prices eventually fall in the future.
A stock price of about $500 looks reasonable by the end of 2026, and this would represent a gain of more than 30% from Micron Technology's current price of about $380. This gain would account for the company's growth while also respecting the fact that memory demand may not remain elevated forever.
