BofA Says Micron Is Trading Under 10x Earnings and Wall Street Is Completely Missing the Story

Memory stocks just went from cyclical chip plays to AI-era essentials, and Bank of America’s Vivek Arya thinks the market is still pricing them like the old version. Speaking on CNBC the morning after Micron Technology (NASDAQ:MU | MU Price Prediction) reported, BofA’s senior semiconductor analyst argued that “what we are witnessing is what I would call a structural rather than a cyclical shift in the memory industry. It is critical to AI. There is no AI without memory.”

The setup behind that call is the print itself. Micron delivered fiscal Q3 revenue of $41.46 billion, beating consensus by 17.60%, and non-GAAP EPS of $25.11 against a $20.28 estimate, the company’s seventh consecutive EPS beat. GAAP gross margin landed at 84.6%, up from 37.7% a year earlier, a transformation more typical of a software company than a DRAM maker. Q4 guidance calls for revenue of $50 billion and non-GAAP EPS of $31, both up sequentially, as detailed in the company’s 8-K press release.

What Arya thinks Wall Street is missing

Arya’s structural case rests on three pillars. First, supply is genuinely hard to add. “You need 3 to 4 times the number of wafers to create the same amount of capacity with high bandwidth memory as you would do with a conventional product. So it’s just harder to create.” Second, memory is becoming a meaningful slice of hyperscaler budgets. Memory is almost 5 to 40% of cloud capital spending, and customers tolerate the price because the new compute stack pays for it. Third, the agreements. CEO Sanjay Mehrotra disclosed multi-year Strategic Customer Agreements covering 16 customers with price floors, a structural change from the spot-market whiplash that defined prior cycles.

Arya pegs the supply-demand imbalance lasting until at least the end of next year, with AI buildouts running at least until the end of this decade. Mehrotra’s own framing tracks closely. “Micron’s record fiscal Q3 financial results and even stronger outlook for Q4 reflect the strategic value of memory in the AI era.”

The valuation math nobody wants to do

Now to the line that did the most work on CNBC. “Nvidia, Broadcom, Micron, they are all trading below the S&P 500 multiples. Micron is basically trading sub ten times right now.” The forward P/E on Micron sits at 9. Stack that against NVIDIA (NASDAQ:NVDA) at a forward 23 and Broadcom (NASDAQ:AVGO) at 34, and you can see why Arya thinks the memory name is the cheap entry into the same secular trade.

And the run has happened anyway. Micron is up 267.54% year to date through June 24, with the stock adding another 12.64% in Thursday’s session to $1,181. NVIDIA, by contrast, is up just 6.83% YTD; Broadcom 10.8%. Even after the surge, the multiple compressed because earnings outran the share price. Morgan Stanley moved its target to $1,200 from $1,050, and the analyst consensus 12-month target ratcheted up to $1,406.86 across 51 covering firms.

What HBM and the customer agreements actually buy you

The Cloud Memory segment alone did $13.77 billion in Q3, up from $5.28 billion in Q1 of the same fiscal year. HBM4 is in volume shipments to a lead AI accelerator customer, with HBM4E slated for calendar 2027 volume production. Mehrotra’s pitch on the agreements is direct. “We believe our multi-year Strategic Customer Agreements will significantly enhance the durability and predictability of Micron’s strong financial performance.”

Durability is the word that matters. Memory bulls have been burned before by the boom-bust cadence, and the BofA argument is that price floors, HBM wafer intensity, and locked-in volume change the shape of the curve. If Arya is right, the stock is being valued for the old cycle while operating in a new one. If he is wrong, the 5 to 40% of cloud capex figure compresses, and the multi-year agreements get renegotiated. That is the trade.