This Incredibly Cheap Artificial Intelligence (AI) Stock Is a Terrific Bargain Right Now

Micron Technology (NASDAQ: MU) is having a woeful April as shares of the memory specialist have dropped 20% so far this month, and the tariff-fueled turmoil has a lot to do with the stock's recent pullback. Reports suggest that Micron could increase the prices of its memory products amid the ongoing tariff war. That's because Micron has a global manufacturing footprint, including factories in the U.S., Japan, Taiwan, and China.

However, semiconductors have been exempted from tariffs by both the U.S. and China (at least so far). Additionally, the Trump administration has put a 90-day pause on imposing reciprocal tariffs on most of its trade partners who would have otherwise been subjected to higher tariff rates. Also, the administration has exempted imports of memory chips and hard drives from China.

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As such, Micron may not need to raise the prices of its offerings, a move that may have hurt the demand since its customers would have had to contend with increased costs. What's more, Micron's memory products are witnessing such strong demand that the company is finding it difficult to produce enough of them. This was evident from the company's impressive numbers in the previous quarter, as well as its bright outlook for the current one.

Let's take a closer look at the reasons why buying Micron stock following its latest pullback seems like a smart thing to do.

Micron is too cheap to ignore right now

For a company that delivered a 38% year-over-year increase in revenue in the previous quarter, along with a 3.7x jump in earnings, Micron's valuation makes it worth buying hand over fist right away. The company is trading at less than 17 times trailing earnings. Its forward earnings multiple of 10 is even cheaper.

The tech-laden Nasdaq-100 index, meanwhile, has a trailing price-to-earnings ratio of 27 and forward earnings multiple of 23. Micron, therefore, is significantly cheaper right now, considering the phenomenal growth that it has been delivering in recent quarters.

MU Revenue (TTM) data by YCharts

Even better, Micron is incredibly cheap when we take its potential earnings growth into account. The stock has a price/earnings-to-growth ratio (PEG ratio) of just 0.15 based on the projected earnings growth it could deliver over the next five years, according to Yahoo! Finance. The PEG ratio is calculated by taking a company's future earnings growth potential into account, and a reading of less than 1 indicates that a stock is undervalued.

So, Micron's PEG ratio suggests that it is very cheap, considering the expected growth it could clock over the next five years, driven by the deployment of AI infrastructure and devices capable of running AI workloads.

AI proliferation is set to drive healthy growth in memory demand

Micron is benefiting from the fast-growing demand for high-bandwidth memory (HBM) chips used in graphics processing units (GPUs) to run artificial intelligence (AI) workloads in data centers. The company's data center revenue tripled year over year, with HBM alone accounting for a record $1 billion in quarterly revenue.

Micron says that its HBM shipments exceeded expectations. What's more, the company has sold its entire HBM capacity for 2025, and it is currently "focused on growing HBM capacity in our existing manufacturing facilities to meet requirements through 2026." Another factor worth noting here is that Micron has raised its total addressable market (TAM) estimate for HBM to $35 billion for 2025.

That figure is likely to head higher in the long run, with one third-party estimate putting the size of the HBM market at almost $86 billion in 2030. So, Micron's data center business still has a lot of room for growth in the long run on the back of solid HBM demand. But this isn't where the company's AI-related catalysts end.

Micron's memory products are also used in smartphones and personal computers (PCs). The usage of memory in both these applications is rising thanks to AI. Specifically, Micron says that the dynamic random access memory (DRAM) content in AI-enabled PCs is a third more than the average content used in PCs last year. Meanwhile, flagship AI smartphones are using 50% more DRAM than the 8 gigabytes (GB) of DRAM seen in 2024 models.

It is worth noting that the shipments of both AI-capable smartphones and PCs are expected to jump at an annual pace of almost 35% through 2029. This could pave the way for stronger growth in Micron's memory shipments in the long run, complementing the healthy growth in the company's data center business.

As such, Micron Technology's prospects seem robust, and the semiconductor stock's valuation means that investors can buy it at very attractive levels right now, and they may not want to miss this opportunity since the company's outstanding growth could help it overcome its recent slump and fly higher in the long run.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.