As the artificial intelligence (AI) boom continues to heat up, Micron Technology (MU) and Intel (INTC) have become focal points for investors. So far this year, these two stocks have risen 228% and 192%, respectively. However, some Wall Street analysts believe the two companies are now significantly overvalued.
Morningstar analyst William Kerwin has set a price target of $500 per share for Micron, implying a 44% downside from the current share price of $898.
Micron primarily manufactures memory and data storage solutions based on DRAM and NAND flash technology, with its products widely used in data centers, mobile devices, personal computers, and automotive systems. Although Micron has benefited from a severe memory chip supply shortage driven by AI demand, Kerwin argues that the company lacks a durable competitive advantage.
“We do not believe Micron has an economic moat,” Kerwin wrote, pointing to the capital-intensive nature of the memory chip industry and the company’s mediocre profit margins. “We view DRAM and NAND as commodity-like products that are vulnerable to market supply-demand dynamics and persistent price erosion.”
Looking at the latest financial results, Micron’s revenue grew 196% to $23.8 billion, while adjusted net income surged 682% to $12.20 per diluted share. However, in the DRAM and NAND segments, Micron has lost market share, while Samsung and SK Hynix have gained ground. The latter two, with their advantages in production capacity and revenue, have more funds to invest in research and development.
Wall Street expects the current memory chip cycle to peak in 2028, with prices falling sharply in 2029. The consensus forecast is for Micron’s adjusted earnings to grow at a compound annual rate of 13% through 2029. The current price-to-earnings ratio of around 40x appears excessively expensive. Among 50 analysts, the median price target for Micron is $660 per share, implying a 26% downside from the current price of $898.
JPMorgan analyst Harlan Sur has set a price target of $45 per share for Intel, implying a 60% downside from the current share price of $115.
Intel’s vertical integration was once a significant strength, with the company controlling the entire process from chip design to manufacturing, at one time considered the pinnacle of semiconductor manufacturing technology. However, TSMC has taken the lead in manufacturing technology since 2017 and now produces 95% of the most advanced chips.
Today, Intel remains the largest supplier of central processing units (CPUs), but over the past decade, due to execution missteps and manufacturing delays, the company has lost substantial market share in both data center servers and client devices, with main competitors being AMD and Arm.
Although Intel is seeking opportunities in contract chip manufacturing and AI inference — and the company stated that inference workloads surpassed training workloads last year — doubts remain about its transformation efforts. The company has struggled to win large foundry customers, with first-quarter revenue growing only 7% and its foundry division losing $2.3 billion on $4.6 billion in sales.
Harlan Sur noted: “From a fundamental perspective, Intel faces severe macro headwinds and a highly competitive computing environment, with market doubts about its execution capabilities… From a financial standpoint, the stock will continue to face pressure due to ongoing concerns about the sustainability of dividend payments.”
Wall Street expects Intel’s adjusted earnings to grow at a compound annual rate of 77% through 2027. Even so, the current price-to-earnings ratio of around 200x remains extremely expensive. The median analyst price target for the stock is $96 per share, implying a 16% downside from the current price of $115.
In summary, Micron faces valuation normalization pressures due to its lack of an economic moat, the commodity-like nature of the memory chip industry, and an impending price downtrend cycle. Intel, meanwhile, is plagued by lagging manufacturing technology, intensifying market competition, and weak financial performance. Although both companies are riding the AI wave, their respective structural issues have made Wall Street cautious about their prospects, and investors should be alert to the risk of a pullback from current highs.
