Micron Stock: Buy, Sell, or Hold?

Key Points
Micron shares have been upended by a wave of company-specific news paired with broad sector weakness.
Much of this stems from impulsive selling that doesn't consider the bigger-picture reality, though.
While Micron is ripe for a reversal, that doesn't mean a rebound is in the immediate offing.
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It's been tough to be a Micron Technology (NASDAQ: MU) shareholder of late. The stock's down nearly 30% just since its mid-March peak, dragged lower by several concerns, like big capital expenditure plans, worries that new computer processing technology from Alphabet's Google will reduce the artificial intelligence (AI) industry's need for memory chips, and presumptions that the company's enormous pricing power -- and, therefore, high profit margins -- stemming from a lack of supply may have already peaked.
These are all legitimate concerns, to be sure. In the meantime, the market's simply soured on most artificial intelligence-related stocks. Broadly speaking, though, the sellers overshot their target here. This dip is a great chance to step into a stake in Micron at a nice discount.
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3 reasons to buy Micron stock
Don't misunderstand. This stock may or may not have hit its ultimate bottom yet. It could conceivably sink even lower. It's arguably closer to a major bottom than not, however, and certainly cheap enough now for long-term investors to get into a long-term stake for a trio of reasons.
One of these reasons is the stock's valuation. Even if last quarter's gross margin of 74.4% and operating income margin of 67.6% are poised to come back to Earth in the near future, Micron's forward-looking price-to-earnings ratio of right around 6 suggests this contraction is already factored in, and then some.
In a similar vein, while plenty of individual retail investors have joined the bearish mob to fuel a sell-off that appears to have taken on a life of its own, it's worth noting that the analyst community isn't dissuaded. Unfazed by all the recent volatility, the consensus price target still stands at $547.12, which is 70% above the stock's present price.
The vast majority of these analysts also still rate Micron stock as a strong buy, by the way.
But what about Google's new ability to perform the same amount of AI computing work with much less memory hardware? Specifically, its recently unveiled TurboQuant can compress the large language models used by most artificial intelligence platforms to require only one-sixth the amount of memory presently required.
It's impressive to be sure. Just don't jump to the wrong conclusion. Every technological advancement comes with some sort of trade-off. In this instance, the trade-offs are feared to be effective speed for end users and total power consumption. Only time will tell.
There's a dimension to the matter here, however, that's not being considered. That is, while Google's TurboQuant tech could accomplish with far fewer memory chips the same amount of AI work currently being done, this same solution will be capable of doing even more high-performance computing with the amount of physical memory in use right now and projected to be used in the future.
Let's face it, the technology sector's winners are usually the companies offering the best performance rather than the lowest cost.
Long-term investors won't care if this is the exact bottom or not
Again, none of this is to suggest that Micron shares are due for an immediate bullish reversal. As was noted, much of this weakness appears to be the result of sheer bearish momentum, fueled by a sweeping sell-off of most artificial intelligence stocks that could be challenging to bring to an immediate stop.
This fear-driven sell-off is one we've seen many times before, though, with practically all of them eventually preceding higher highs. It will require some patience. But the rebound will be worth the wait.
Should you buy stock in Micron Technology right now?
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James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Micron Technology. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.