Micron’s stock has jumped about 700% in the past year, but it still trades at a low valuation. That’s mostly because many people still see memory chips as a cyclical commodity, like wheat or copper. Micron’s CEO, Sanjay Mehrotra, says this view is outdated and believes the stock is still undervalued, though it’s worth taking a closer look at his argument.
This valuation gap is clear. Micron’s forward price-to-earnings ratio is about 6.4, according to FactSet, while the average for the broader semiconductor index is around 20.6. Mehrotra disagrees with the idea that memory is just a commodity. In a recent interview, he said memory is now a key part of AI infrastructure and should be seen as a high-value product.
That argument, however, comes with a caveat. A product can be valuable and in high demand but still act like a commodity—gold is a good example. The key question is whether Micron’s customers would stick with them or switch to cheaper memory from China. For now, limited production in China and political issues have mostly protected Micron from this risk. Micron has been testing memory components from Chinese manufacturer CXMT, suggesting that at least part of Micron’s market could be exposed if Chinese supply becomes more readily available.
Even if memory is no longer seen as a commodity, that change might not help Micron much. Right now, Micron and its South Korean rivals SK Hynix and Samsung Electronics lead the market because tough industry economics have kept the number of big players small. If memory makers start getting higher valuations, more companies might want to join in. Intel, for example, has already shown interest in returning to this business after leaving it years ago.
Micron could still be undervalued if the market hasn’t fully recognized how much AI will drive demand for memory. For now, though, the stock is still priced like that of a commodity provider until something changes.
On Friday, shares rose about 1% in premarket trading, continuing a rally that has already more than tripled the stock’s value this year.
