Micron (NASDAQ:MU) was dumped by major hedge funds in the second quarter of 2026 despite the stock’s massive gains and AI-related demand. Latest 13F filings show that billionaire David Tepper’s Appaloosa Management cut its Micron stake by 41%. However, the stock is still among its top 5 picks. Tepper wasn’t alone in trimming. Citadel Advisors, Renaissance Technologies, Two Sigma Investments and Bridgewater Associates significantly cut their stake in MU during the June quarter.
Billionaire Philippe Laffont’s Coatue Management, however, piled into Micron last quarter, raising its stake by 1,794% to a $3.63 billion position.
MU is up 220% so far this year.
Philippe Laffont of Coatue Management
Bull case
About half of Micron’s revenue now comes from data centers. Management expects DRAM and NAND supply to stay tight even beyond 2028. NAND revenue jumped about 360% year over year in the last quarter, driven by pricing power rather than volume.
Bulls say Micron is no longer a cyclical company. Its growth is now tied to AI capital spending, which isn’t bound to the traditional memory boom-bust cycle.
Why Hedge Funds Are Selling? Possible Reasons
The main reason is the stock has gained too much and hedge funds are taking profits to invest in other names. But let’s look at the real bear case for MU.
Even if memory supply catches up to demand as manufacturers expand capacity, average selling prices could fall and hurt Micron’s margins. Micron management said new generations of its mobile, server, and HBM products cost more to produce per unit of storage, which is expected to push blended DRAM cost-per-bit higher going forward.
Bears also highlight rising competition from Chinese memory maker CXMT. CXMT’s market share rose to about 5.5% last year and hit 7.7% in the first quarter of 2026, up from essentially nothing. CXMT is expected to keep expanding and could reach Micron’s DRAM wafer capacity by 2029. Micron’s own DRAM market share has increased only slightly, from 19% in 2016 to 22.4% in 2026, amid competition from Samsung and SK Hynix.
Valuation
Trailing non-GAAP P/E is 21.54 versus a sector median of 26.64, about 19% below. Forward non-GAAP P/E is 13.24, a 46% discount to the sector median of 24.51. GAAP forward P/E is at 13.38, a 57% discount to the sector’s 31.23.
However, trailing EV/Sales is 11.89 versus a sector median of 4.01, about 196% higher. Trailing Price/Sales is 12.11 versus 3.86, about 214% higher.
While we acknowledge the risk and potential of MU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MU and that has 10,000% upside potential, check out our report about the cheapest AI stock.
READ NEXT: 33 Stocks That Should Double in 3 Years and Cathie Wood 2026 Portfolio: 10 Best Stocks to Buy.
Disclosure: None. Follow Insider Monkey on Google News.
