This year, memory chip giant Micron Technology (MU.US) has seen its growth prospects revitalized, with its stock price soaring over 250%, driven by capturing the multi-year cloud supercomputing cycle and securing strong orders for its HBM3E/HBM4 products from hyperscale data center clients. Despite this, considering the company's enhanced pricing power, a tight supply-demand market dynamic, and aggressive capacity expansion plans through 2030, analyst Juxtaposed Ideas argues that while Micron is "feeling the pressure of AI success," its valuation remains deeply undervalued. As the year draws to a close, Micron's blistering rally shows no signs of stopping, hitting a fresh record high on Monday. In contrast, some semiconductor and memory chip peers faced corrections in November after the AI hype cooled, weighed down by lofty valuations and heightened debt risks. The core driver behind Micron's stock strength stems, to some extent, from its previously severely undervalued position—recent market rotation has seen funds flood into deep-value plays like Micron. More crucially, Micron has successfully capitalized on the cloud supercomputing cycle, with its HBM3E/HBM4 products winning favor from major clients, which has not only ended the slump in memory chip demand and high inventories plaguing the sector since 2022 but also unlocked substantial new growth avenues. For instance, Micron has explicitly stated that the market is currently "supply constrained," explaining why its entire 2026 HBM production capacity is already sold out. Concurrently, the overall HBM market is expanding rapidly, projected to grow from $35 billion in 2025 to $100 billion by 2028, representing a staggering three-year compound annual growth rate (CAGR) of 41.9%. In Juxtaposed Ideas' view, this growth target is not overly aggressive. Within the broader cloud supercomputing cycle, Micron has forged a close partnership with NVIDIA (NVDA.US) and is accelerating product qualification with multiple hyperscale data center customers. The underlying reason, as market consensus suggests, is that "AI workloads require massive memory support... compared to consumer devices, the demand for memory capacity per system in AI servers and enterprise applications is growing exponentially." The explosive growth in memory demand is evident across multiple dimensions: consistently declining inventory levels, a sharp rise in product prices, a shift in contract pricing from annual to monthly terms, and a significant increase in long-term order bookings. Based on this market trend, Micron has initiated a business portfolio transformation, deciding to wind down its consumer brand, Crucial, to focus on "long-term profitable growth segments in the memory and storage market." This strategic pivot is driven by growth constraints in the consumer business. Micron's Mobile and Client Business Unit (MCBU), which handles the Crucial brand SSDs and memory modules, reported revenue of $11.86 billion for fiscal 2025, up a mere 1.6% year-over-year, with an operating margin of 16.7%, indicating lackluster profitability and growth momentum. In stark contrast, the other two core business units performed exceptionally: the Cloud and Mobile Business Unit (CMBU) reported fiscal 2025 revenue of $13.52 billion, surging 256.7% year-over-year, with an operating margin soaring to 45.2%, up 38.8 percentage points from the previous year and only slightly below the 46.5% recorded in 2019; the Core Data Center Business Unit (CDBU) reported revenue of $7.22 billion for the same period, up 44.9% year-over-year, with an operating margin of 30.1%, a 25 percentage point improvement, though 16.4 percentage points below the 46.5% seen in 2019. This comparison clearly highlights the strategic foresight behind Micron's business realignment. Following the shutdown of the consumer business, the freed-up capacity can be redirected towards high-growth, high-margin product areas. Meanwhile, Micron has raised its fiscal 2026 capital expenditure guidance to $20 billion, a 44.9% increase year-over-year, with plans to build new capacity in 2027, 2028, and 2030 to further solidify its supply capabilities. This capacity expansion plan is perfectly timed. According to two informed sources, in October, tech giants including Google (GOOGL.US), Amazon (AMZN.US), Microsoft (MSFT.US), and Meta (META.US) presented Micron with essentially unlimited purchase requests, explicitly stating they would take "as much as the company can deliver, regardless of price." A similar demand frenzy is observed in the AI sector. Samsung Electronics (SSNLF.US) and SK Hynix plan to expand capacity, targeting monthly production of up to 900,000 high-bandwidth DRAM chips to meet the demands of projects like "Stargate" and AI data centers. SK Group noted in a separate statement that this capacity would be more than double the industry's current total output for high-bandwidth memory chips. This implies that Micron will possess significant pricing power until the tight supply situation eases. This is also reflected in the financials: for the first quarter of fiscal 2026, Micron's adjusted gross margin reached 56.8%, up 17.3 percentage points year-over-year; for the full fiscal 2025, the adjusted gross margin was 40.9%, an improvement of 17.2 percentage points, though 6 percentage points below the 46.9% seen in 2019. A series of data points indicate that after the trough in 2022, Micron is firmly back on a high-growth trajectory. For the first quarter of fiscal 2026, Micron's adjusted EPS reached $4.78, increasing 57.7% sequentially and surging 167% year-over-year; management's guidance for the second quarter of fiscal 2026 is even more optimistic, projecting adjusted EPS of $8.42, representing sequential growth of 76.1% and a staggering year-over-year increase of 439.7%. Based on this, Micron's adjusted EPS for the second half of fiscal 2026 is estimated to be approximately $13.20, up 294% year-over-year; revenue for the same period is projected to be around $32.34 billion, a 92.9% increase year-over-year. This series of impressive figures marks a complete reversal of the revenue and profit declines seen in fiscal 2023 and has prompted the market to upwardly revise its long-term growth expectations for Micron—consensus estimates now project revenue and net profit CAGRs reaching 14.9% and 18.6%, respectively, by fiscal 2030. For context, Micron's revenue and net profit CAGRs over the past 5 years were 11.8% and 24%, and 8.7% and 11.9% over the past 10 years. The significant upward revision in earnings expectations has also propelled the stock price to a cumulative gain of 355% since the low in April 2025. Despite the substantial rally, Micron's valuation remains highly attractive from a valuation perspective. At the current stock price of $276.27, and based on the annualized adjusted EPS of $26.40 derived from the first half of fiscal 2026, Micron's expected non-GAAP P/E ratio for fiscal 2026 is just 10.46x. Comparing this to historical valuation percentiles: this figure is not only below the 1-year average of 11.52x but also significantly lower than the 5-year average of 75.59x, the pre-pandemic 5-year average of 18.25x, and the 10-year average of 24.99x. Looking at growth-adjusted valuation metrics, based on the annualized adjusted EPS of $26.40 for the first half of fiscal 2026 and the consensus adjusted EPS estimate of $35.14 for fiscal 2028, Micron's forward two-year expected non-GAAP PEG ratio is just 0.68x. This compares favorably to the 5-year average PEG of 3.15x, the pre-pandemic 5-year average of 18.25x, and the 10-year average of 2.10x, highlighting a significant valuation advantage. Micron's valuation appeal is also prominent when compared to industry peers (all figures below are expected non-GAAP P/E / forward 3-year expected non-GAAP PEG): Samsung Electronics: 25.35x / 0.74x; NVIDIA: 40.35x / 0.84x; AMD (AMD.US): 54.19x / 1.19x; Broadcom (AVGO.US): 34.69x / 0.93x; Marvell Technology (MRVL.US): 30.98x / 0.68x. Thus, even after a tripling in stock price, backed by robust demand for HBM3E/HBM4 products, a high-growth and high-profitability business outlook, and the potential for strong free cash flow despite significant capital expenditures through 2030, Micron's valuation remains reasonable. Financial data corroborates this: for the first quarter of fiscal 2026, Micron's free cash flow reached $3.9 billion, up 387.5% sequentially and surging 3387.5% year-over-year; for the full fiscal 2025, free cash flow was $3.72 billion, an increase of 863.9% year-over-year. Ample cash flow has also optimized the company's balance sheet, with net debt falling to $1.43 billion, a 76.9% reduction year-over-year. Over the past few months, Micron's stock price has charted an almost vertical ascent, consistently breaking above the 50-day, 100-day, and 200-day moving averages and repeatedly setting new record highs, a remarkable display of strength. At the current price of $276.27, and based on the fiscal 2026 expected non-GAAP P/E of 10.46x and the annualized first-half adjusted EPS of $26.40, the price is very close to Juxtaposed Ideas' base case fair value estimate of $276.10. If calculated using the consensus adjusted EPS estimate of $35.14 for fiscal 2028, Micron's stock price could potentially climb towards Juxtaposed Ideas' base case long-term target price of $367.50, implying an upside potential of nearly 30%. Even more promising is that, supported by the long-term tailwinds of the cloud supercomputing cycle, strong HBM product demand, a continuously improving balance sheet, and a highly attractive valuation, coupled with Micron's solid 26% market share in the global memory chip market, its valuation could potentially converge towards the pre-pandemic 5-year average P/E of 18.25x—a level that is not only below the industry average of approximately 32x but also similar to peer Samsung Electronics' valuation of 17.69x during that period. If the valuation reverts to this level, Micron's stock price could potentially reach Juxtaposed Ideas' optimistic long-term target price of $641.30, implying an upside potential of over 130%. It is important to note that after a significant rally, Micron's stock price, along with its Relative Strength Index (RSI) and trading volume, are at elevated levels, indicating an overbought condition with potentially excessive short-term upward momentum. Given that market sentiment towards high-growth, high-profitability stocks can shift abruptly, potentially triggering price volatility, Juxtaposed Ideas suggests that interested investors might consider patiently waiting for a pullback to enter at levels offering greater margin of safety. The previous resistance level around $240 from November 2025, which is also near the 50-day moving average (approximately $232), could present a favorable entry point, potentially offering improved safety margin and long-term return potential.