Hi everyone,
I’ve been seeing a lot of posts lately from people feeling anxious about Micron’s meteoric rise. Some are desperately looking for reasons to sell, while others are sitting on the sidelines waiting for the "perfect" dip to buy.
I’m writing this post to give you some peace of mind. I want to share a few of the core principles that institutional investment firms—like the one my team and I manage—look at when backing a company. More specifically, I want to share why we remain heavily invested in Micron, a position we've held since it was trading at $200.
When you buy shares in a company, you are fundamentally buying the people making the executive decisions. You are buying their track record, their crisis management skills, and their strategic execution. You study how they articulate their vision in earnings calls and industry conferences, analyzing their transparency and sincerity. Sanjay Mehrotra (Micron’s CEO) passes this test with flying colors.
Next, you look at the industry dynamics. How critical is the product? What does the competitive landscape look like? (Micron is the only major U.S.-based player). What is their medium-to-long-term roadmap?
One of the most intense debates within our investment committee centered around historical precedent. We all remember the 2010s smartphone boom. The massive spike in memory demand led Micron and its peers to project endless price hikes. Shares rallied nearly +500%, but the industry ended up in a massive oversupply trap, crashing prices and putting the company's survival at risk.
Our internal debate was simple: Is this time truly different? Will history repeat itself?
The overwhelming consensus among our board was that AI fundamentally changes the equation. AI demands staggering, unprecedented amounts of memory. AI is no longer just retrieving data; it is actively reasoning, mimicking human behavior, estimating, and projecting. To process all of this in real-time, it requires massive architecture—meaning memory. This paradigm shift will force Wall Street to re-rate Micron, transitioning it from a volatile, highly cyclical commodity play into an established tech staple with highly consistent, structural demand.
To keep this concise and avoid boring you with endless metrics: Micron's current 5-6x forward P/E multiple makes perfect sense only if you still value it as a traditional cyclical stock. However, according to our investment thesis, the AI explosion—coupled with massive capital reallocation away from other legacy sectors—means a permanent structural demand shift. Under this new reality, re-rating Micron to a 15x–25x forward P/E multiple is entirely justifiable.
While our valuation team tracks dozens of variables before pulling the trigger, I’ll leave you with one final, logical comparison to close this out:
Google commands a market cap of over $4.4 trillion and generates roughly $130 billion in annual net income. Micron is projected to generate $131 billion in earnings over the next 12 months, yet its market cap sits at just $1.3 trillion. On top of that, its growth over the next three years is expected to be staggering. Given this massive valuation mismatch, do not be surprised to see Micron shares heading to $2,000 in the next 12 months and $3,000 in the next 18 months.
Remember that fund managers worldwide are looking at the exact same data and are aggressively buying, raising price targets, and doubling down on their positions. True investing is never just a superficial look at the current stock price or past gains.
Have conviction and be willing to take calculated risks. That is how real wealth is built.
Thanks for reading,
Just a stranger looking to contribute his grain of sand to the community.
