Micron (MU +0.90%) has been one of the best stocks to own over the past year. If you bought shares 12 months ago, you're already up around 350%.
The company is one of the top providers of memory chips and other data storage products, and it has emerged as a top artificial intelligence (AI) stock due to a deep supply-and-demand imbalance in the memory market. However, after hearing what Micron's management had to say about its outlook, I think there is plenty more room for this stock to run in 2026.
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Micron can't come close to meeting demand
AI computing units need a ton of different components, and memory is one of them. Compared to logic chips such as GPUs, there's not as much differentiation between the wares of the various memory providers. As a result, the market treats memory chips largely as commodities, which means their prices are primarily driven by supply-and-demand economics. Currently, demand for those chips is high, and supply is constrained by production capacity. This has caused prices to soar, benefiting Micron and its peers.
NASDAQ: MU
Key Data Points
While Micron has plans to get more production capacity online in 2027, that doesn't affect 2026. During the fiscal 2026 Q2 conference call last week, management noted that for some of its key customers, the company would only be able to fulfill about one-half to two-thirds of their demand in the medium term. While management didn't define "medium term," I think it's safe to assume that it means about one year.
So, Micron can't produce nearly enough memory chips to meet demand over the next year, and with demand slated only to rise over the next few years, it's sitting in a great spot. In fiscal Q3, management expects revenue to come in at around $33.5 billion, up from $23.9 billion in fiscal Q2 (which ended Feb. 26) and up from $13.6 billion in fiscal Q1. Investors seldom see growth ramps like that, and based on that outlook, the stock is incredibly cheap.
MU PE Ratio (Forward) data by YCharts.
Micron trades for just 7.3 times forward earnings, which shows the market's skepticism about how long this memory chip supply-and-demand imbalance will last. However, if demand stays high for several years and production capacity remains constrained -- as I think it will -- Micron could be one of the best-performing stocks in the market in 2026 and maybe over the next few years as well.
