memory chip manufacturers micron technology (NASDAQ:MU) I have hot hands now. Micron stock is trading near all-time highs, up 48% in 2024 and 93% over the past 52 weeks. The current artificial intelligence (AI) boom has poured nitro into Micron's growth fire, propelling this stock chart into the stratosphere. Modern AI systems use large amounts of memory and solid-state storage. As a major supplier of these chips, this is good news for Micron and its shareholders.
Long-time shareholders can celebrate innovative long-term gains.Inventory has more than doubled S&P500 Rise in the index over the past 10 years. But is this a good time to start a new position at Micron?
Let's take a look at how much room Micron has to rise further at this point.
Are Micron's growth prospects measured in microns or miles?
Micron's products are in high demand.
Training and operating advanced AI systems is computationally intensive, requiring large amounts of DRAM chips in a short period of time. The same system also requires large amounts of long-term storage with fast read and write performance. The only reasonable option to meet this requirement is NAND chips, also known as flash memory or solid-state devices (SSDs).
Micron is not only a leading manufacturer of memory chips, but also an innovator in this field with outstanding performance at this time. Unparalleled performance per unit of power consumption makes Micron's latest and greatest high-bandwidth memory solutions attractive to builders of very large systems. Nvidia selected this memory type as the standard integrated DRAM for next-generation AI accelerators.
While the unit price of NAND chips is stable in 2024, the average spot price of mass-market DRAM chips is up 11% since the beginning of the year. In addition to its strong foundation, industry leader Samsung expects to raise the price of its NAND chips by 20% in the next quarter, and Micron's technological advantage should enable it to raise prices even faster.
Therefore, Micron's growth prospects are excellent in the short term, and we don't expect things to change significantly in the coming years. Samsung and its friends may catch up to Micron's HBM dominance over time, but that's a long-term challenge.
Is Micron's stock appropriately valued?
And this is where things get uncomfortable.
Yes, all market trends are bullish. Unfortunately, the memory industry has only recently recovered from the depths of a severe downward trend. As a result, Micron's sales are down 43% from his summer of 2022, and free cash flow is significantly negative.
Earnings-based metrics are meaningless when earnings and cash flow are negative, but the ever-present price-to-sales ratio is at levels not seen since the dot-com bubble.
Final Verdict: You should probably choose another AI stock
I've been a Micron shareholder for many years, and the cyclical nature of the memory industry should no longer surprise anyone.
But this sharp upward trend is unlike any other. Micron's assessment only makes sense if you expect structural changes across the memory chip sector. Specifically, as demand for high-end memory solutions soars, Micron must maintain its long-term technology lead.
Even for me, that's a little too much.
At this point, I'm seriously considering taking some of Micron's profits and reinvesting them in cheaper growth stocks or stable index-tracking exchange traded funds (ETFs). Your mileage may vary, and your Micron may have a little more rocket fuel in its tank, but every little bit of this precious stock will help you sleep better at night.
Should you invest $1,000 in Micron Technology right now?
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Anders Bylund holds positions at Micron Technology and Nvidia. The Motley Fool has a position in and recommends Nvidia. The Motley Fool has a disclosure policy.
Is it too late to buy Micron Technology stock? Originally published by The Motley Fool
