Micron Stock Is Up 700% Over the Past Year. Its Shares Still Look Relatively Cheap.

Shares of Micron Technology(NASDAQ: MU) have soared by 710% over the past 12 months as the company has benefited from the rising demand for memory processors used in artificial intelligence (AI) data centers. Even amid the surging share prices of many AI stocks, Micron's performance stands out among the crowd.

Technology companies -- including Alphabet, Amazon, Microsoft, Meta Platforms, and others -- are committing to eye-watering amounts of AI capital expenditures, which will add up to $750 billion this year alone, as they focus on offering the best AI services and models. That pursuit could fuel even higher memory sales volumes in the coming years.

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Amazingly, even after its remarkable rise, Micron's stock still looks relatively cheap. Here's what potential investors should know.

Making hay while the AI sun shines

As tech companies accelerate the build-out of their AI infrastructure, Micron is benefiting from a surge in demand for its memory chips. In its fiscal 2026 second quarter, which ended Feb. 26, the company's sales rose 196% year over year to $23.9 billion, and non-GAAP (generally accepted accounting principles) earnings spiked 682% to $12.20 per share.

And the good times may not be ending anytime soon. Both Meta and Alphabet recently said they're increasing their capital expenditures this year, and Alphabet's leadership has already said it will likely spend more on capex in 2027 than the estimated $190 billion it expects to spend this year.

The memory business has historically been highly cyclical. Micron has experienced many boom periods when demand exceeded what the manufacturers could supply, followed by reversals as production capacity expansions across the industry overshot, resulting in surpluses and crashing prices. And while that could eventually occur for AI memory chips as well, Micron's management believes that what the company is experiencing with the AI megatrend is unprecedented.

For example, Micron's management noted on the second-quarter earnings call that it had received its first-ever five-year contract for memory processors. That's an unusually long customer commitment in this space.

As Micron CEO Sanjay Mehrotra summed up the shift: "AI hasn't just increased demand for memory -- it has fundamentally recast memory as a defining strategic asset in the AI era."

In its efforts to keep pace, Micron has increased its research and development spending. And it's not just for data center memory. The company believes the market for humanoid robotics could be a major catalyst for memory and storage demand in the coming years.

"We believe we are on the cusp of a 20-year growth vector in robotics and expect robotics to become one of the largest product categories in the technology world," said Mehrotra on the earnings call. Indeed, he thinks AI-enabled humanoid robots will rival autonomous vehicles in their need for computing capacity, driving even greater memory demand.

Micron stock is a good deal; just don't expect the same returns

Micron's stock trades at a trailing price-to-earnings ratio of about 27 right now, making it far less expensive than the tech sector's P/E ratio of around 43. Even after the stock's massive gains over the past year, investors can feel comfortable that they're not overpaying for Micron right now.

But that doesn't mean they should expect similar returns going forward. That 700% increase would be hard to replicate, to say the least. Each quarterly earnings report going forward will likely have high expectations built into it, and investors are likely to react strongly if those expectations aren't met.

That doesn't mean you shouldn't buy Micron, and it certainly doesn't mean you should sell your shares if you already own them. But if you do buy them now, keep in mind that any hint of slowing demand for artificial intelligence spending could cause the stock to stumble.

Still, I'd feel comfortable putting some money toward Micron stock right now, given the ongoing AI expansion and the company's long-term potential to benefit from emerging technologies like robotics.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Micron Technology, and Microsoft. The Motley Fool has a disclosure policy.