Micron Stock Is Trading at 42x Trailing Earnings. Analysts Say That’s Still Cheap.

Semiconductor stocks have turned into Wall Street’s favorite AI trade. From giant data centers to advanced artificial intelligence (AI) models, almost every new wave of technology now depends on powerful chips running behind the scenes. And right in the middle of that rush sits the memory market, where companies like Micron Technology (MU) play a critical role supplying the DRAM and NAND storage needed to keep AI systems running.

That massive excitement has also sparked concerns that chip stocks may have climbed too far, too fast. But not everyone on Wall Street thinks the sector has entered bubble territory. Vivek Arya, senior semiconductor analyst at Bank of America Securities, recently argued that many semiconductor companies, including memory leader Micron, are still trading below their long-term historical valuation levels despite the strong AI-driven growth story unfolding.

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In his view, the sector is not overheated, but rather “extended but not expensive,” especially when compared with the pace of earnings growth being delivered. The basis of this argument is a major structural shift in the memory business, driven by AI.

The analyst explains that demand is rising four to five times faster than the industry can expand supply, and that’s a gap the memory market has rarely seen before. As AI moves beyond basic applications into reasoning models and agentic systems, the need for high-performance memory has surged sharply. This has pushed high bandwidth memory (HBM) pricing sharply higher, with strong sequential gains and tight supply conditions expected to persist.