After a 77% Monthly Surge, Micron's PE Ratio Remains Less Than Half of NVIDIA's

Micron Tech's stock price is experiencing its strongest monthly percentage gain in nearly 40 years, but analysts point out that even so, the valuation of this chip stock remains low.

Micron's cumulative percentage gain in May has exceeded 77%, poised to set the largest monthly gain since December 1987. Despite the sharp rally, the stock's forward PE ratio remains below 10, less than half that of NVIDIA, and only slightly more than one-third of the implied PE ratio of the Philadelphia Semiconductor Index.

Several analysts told MarketWatch that strong demand for memory chips in the AI era is reshaping market logic, and Micron still offers high cost-performance potential in this wave of AI infrastructure construction.

However, some analysts remain cautious about the long-term outlook, believing that cyclical adjustments on the supply side remain a potential risk.

Sharp Rally, Valuation Still Appears Low

Micron's stock rose 3.6% on Wednesday, extending the previous trading day's historic single-day gain of 19.3%, and hitting a new historical high. The cumulative percentage gain since the beginning of May has reached 77%. If this level is maintained until the end of the month, it will mark the largest monthly gain since December 1987 (when the monthly gain was 78.8%).

However, David Miller, Chief Investment Officer and Portfolio Manager at Catalyst Funds, told MarketWatch that despite Micron's stock price "surging significantly," its forward earnings per share valuation remains below 10 times. "Interestingly, even after such a strong rally, it can still be viewed in some ways as a value investment opportunity," he said.

In comparison, according to FactSet data, NVIDIA's stock price corresponds to a valuation of 21 times future 12-month earnings per share, while the implied PE ratio of the Philadelphia Semiconductor Index is as high as 26.4 times.

AI Reshapes Memory Market Logic

Gil Luria, an analyst at D.A. Davidson, told MarketWatch that investors are realizing that memory chips are the "only" sector in the entire AI trade currently trading at a reasonable valuation.

He pointed out that the memory market in the AI era is vastly different from what it was a few years ago, partly due to the limited number of players in the industry and the lengthening of contract cycles. More critically, the memory market is undergoing a "de-commoditization" process—some high-bandwidth memory products are co-designed with NVIDIA specifically to adapt to its latest products, making them "no longer substitutable." This has prompted NVIDIA and other hyperscale cloud providers to shift to long-term contract procurement rather than buying on demand.

David Miller also stated that Micron represents an opportunity to participate in the long-term construction of AI in the memory sector at a reasonable price, adding that "the company's order backlog far exceeds its supply capacity."

Supply Cycle Risks Cannot Be Ignored

Not all analysts are optimistic about Micron's prospects. William Kerwin, an analyst at Morningstar, expressed doubts about the stock's long-term outlook, stating that adjustments on the supply side could disrupt the current optimistic narrative.

"We remain skeptical... We believe AI is driving a long and sustained upcycle, but it is ultimately a cycle," Kerwin said. He warned that a "significant" amount of new production capacity will come online between late 2027 and 2028, which could become a downward catalyst for memory chip prices and Micron's stock price.