Here’s what a $5,000 investment in Micron could be worth by 2028

Micron (UM -5.63%) is undergoing one of the biggest changes of almost any stock on the market. It is experiencing unprecedented demand for its memory chips and at the same time helping to transform its industry. The measures taken upend some of the long-standing understandings surrounding its activities, but the market has not yet caught up with these changes.

I think this could be one of the biggest investment opportunities right now, as I could easily see a $5,000 investment made in Micron now becoming a $25,000 position by 2028.

Image source: The Motley Fool.

The memory chip industry is evolving

Micron makes memory chips, and it has always been an extremely cyclical industry. There is little that differentiates one brand of memory chip from another, so the chips have practically become commodities. Prices are almost entirely driven by supply and demand dynamics, and right now, AI data center demand has swallowed up all available supply. The resulting severe shortage has caused memory chip prices to skyrocket.

So Micron is experiencing monstrous growth, with revenue soaring nearly 380% year-over-year in its most recent quarter. However, it’s not just about enjoying the winnings. It is taking advantage of this opportunity to reshape its economic model.

While it is great to sell any product during a supply crunch, the opposite is true during a glut, and when this wave of demand for AI is over, we can expect a glut. As a result, Micron is taking steps to ensure its business is strong for the long term. It has entered into numerous multi-year purchase or payment agreements with large customers, and by the end of the third quarter it had locked in about 35% of its revenue through 2030. These agreements set price floors and ceilings for its memory chips, giving Micron far more visibility into its finances over the next few years than it had previously.

This could only have happened in the event of a major supply crisis, as it gave Micron bargaining power with its customers and caused customers to seek more certainty in their memory chip supplies. As more of these contracts come into play, it should reduce the cyclicality of the memory chip industry, which will be a great thing for Micron shareholders. However, the market has not yet begun to price this change into the stock’s price, and this mismatch has created a golden opportunity for investors.

Micron stock is very cheap

Because the market remains convinced that the next bearish phase of the memory cycle will eventually arrive, Micron’s stock is valued at a significant discount. It trades at just 5.3 times estimated earnings for fiscal 2027 (which ends August 2027).

MU PE ratio data (front) by YCharts.

This is the market categorically telling investors that it doesn’t believe in Micron’s long-term growth. However, the market simply isn’t listening to memory manufacturers. Micron management told investors that conditions in the memory chip market will be tighter in 2027 and 2028 than they will be in 2026. As a result, prices will continue to rise. Micron is also building new production facilities, which are expected to come online in mid-2027 and late 2028. This will increase its capacity in the event of a supply crisis, leading to even greater revenue growth.

This will be a huge catalyst that is not currently factored into projected growth rates for 2028. (Wall Street currently only projects 16% growth for 2028.) I think it’s more accurate to anticipate a little more aggressive revenue growth, like 30%, although I still think that’s a major gap.

For fiscal 2027, Wall Street believes Micron will generate $176.55 in earnings per share (EPS). If earnings grow 30% in fiscal 2028, that would bring EPS to nearly $230. If the market adjusts to the idea that Micron is no longer as cyclical as it once was, it could value it at 20 times earnings. This valuation with $230 EPS would give it a stock price of $4,590.

Based on the current price of $920, this suggests the stock could rise fivefold, turning a $5,000 investment into around $25,000. This makes Micron one of the top AI stocks to buy now.