It’s undeniable that semiconductor stocks have emerged as some of the most promising investments during the rise of artificial intelligence (AI). While major players like Nvidia, Taiwan Semiconductor Manufacturing, and Broadcom have captured the spotlight, overall investment in the chip sector over the past two years has yielded impressive returns that surpassed the market.

As of December 20’s market close, the VanEck Semiconductor ETF had risen by 39% in 2024, significantly outperforming both the S&P 500 (SNPINDEX: ^GSPC) and the Nasdaq Composite (NASDAQINDEX: ^IXIC).

However, not every semiconductor stock has performed equally well. For instance, Micron Technology (NASDAQ: MU) saw its shares increase by only 6% in 2024, leading some investors to view this particular stock unfavorably.

Experienced investors recognize that evaluating a stock’s return is only one aspect of identifying investment opportunities. Below, I’ll explore factors that have impacted Micron’s stock performance this year and explain why 2025 could be a pivotal year for the company.

Micron Shares Have Faced Challenges

The graph below indicates the fluctuations of Micron’s stock throughout 2024. The ups and downs shown highlight that Micron shares are quite volatile, with a notable drop of approximately 38% since June over the last six months.

The primary reason behind Micron’s stock volatility appears to stem from investor expectations. When leading firms like Nvidia, Taiwan Semiconductor, and Broadcom consistently show solid growth, investors often apply similar expectations to other companies in the same field.

Nevertheless, while I understand the psychology behind these expectations, it’s essential for investors to recognize that this line of thinking can be flawed. Not all companies in the semiconductor sector produce the same products or fulfill the same roles, meaning every business will face its distinct challenges and opportunities.

Micron’s focus within the AI sector revolves around memory and storage solutions. Though the company has shown strong revenue growth paired with increasing profitability, a disappointing forecast for its fiscal Q2 2025 has rattled investors.

Yet, I don’t believe this should prompt investors to sell their shares. I will discuss why I think Micron’s recent downturn is not justified.

A Potential Rebound for Shares in 2025

Since AI emerged as a significant trend roughly two years ago, one product has risen to prominence in the tech industry: graphics processing units (GPUs).

Firms like Nvidia and Advanced Micro Devices design GPUs that execute complex computations at impressive speeds, powering countless generative AI applications. Additionally, Taiwan Semiconductor manufactures GPUs for firms like Nvidia and AMD, while Broadcom provides essential networking equipment for data centers housing these GPUs.

Given this context, it is understandable that these specific companies have enjoyed extraordinary growth over the past two years.

I believe that Micron has yet to fully capitalize on its potential, but that moment is approaching. As investments in AI infrastructure are projected to reach trillions of dollars in the coming years, the need for GPUs and data center services will likely continue to expand.

On a more specific note, this indicates that as training and inference tasks become increasingly intricate and vital amid the competitive AI landscape, the demand for memory and storage solutions will grow — and Micron is well-positioned to meet that demand.

This concept isn’t merely speculative. In Micron’s fiscal Q1 2025 (which ended November 28), the company reported a staggering 400% year-over-year increase in data-center revenue, reaching an all-time high. Moreover, this segment now makes up over 50% of the company’s business. To me, these trends emphasize a strong need for Micron’s memory solutions, and I anticipate these favorable conditions will persist into the next year and beyond.

While the company’s short-term outlook may not have met expectations, I believe the long-term picture remains bright. According to management, the total addressable market for high-bandwidth memory is expected to soar to $100 billion by 2030, more than six times its current size. With Micron’s trailing 12-month revenue hovering around $29 billion, the company certainly has considerable growth potential ahead.

Is Micron Stock a Good Investment Now?

Assessing Micron’s value can be challenging. Although the company is currently profitable, it has recently transitioned to generating consistent earnings, making the price-to-earnings (P/E) ratio somewhat tricky to apply here.

Instead, I prefer using the PEG ratio to evaluate Micron. This ratio considers analyst projections for earnings growth over a few years. A PEG ratio under 1 can suggest that a stock is undervalued. Currently, Micron’s PEG ratio stands at just 0.23.

From my perspective, Micron’s low price-to-earnings growth (PEG) ratio indicates that investors may be missing the growing demand for memory and storage chips, particularly as artificial intelligence tasks continue to expand. I believe that, in time, the necessity for Micron’s products will become more apparent. Currently, I see purchasing Micron stock as a great investment opportunity for those looking to hold for the long term.

Adam Spatacco holds shares in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool also recommends Broadcom. For more details, check their disclosure policy.

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