Micron Technology (NASDAQ:MU) has had one of the wildest rides in the market this year. The stock is still up roughly 190% in 2026, but it has also fallen more than 25% from the all-time high it set in late June, including an approximate 9% single-day drop on July 28 as chip stocks sold off worldwide. That combination, a stock that has tripled and crashed in the same year, tells you everything about how emotional the AI memory trade has become. The same volatility raises a natural question: how does Micron’s swing compare to a steadier peer in the AI chip supply chain, like lithography giant ASML Holding (NASDAQ:ASML)?
Bull Case: An AI Memory Supercycle
The case for Micron starts with results that are hard to argue with. FQ3 2026 revenue hit a record $41.5 billion, up 346% year over year and 74% sequentially, while non-GAAP earnings came in at $25.11 per share. Management struck 16 Strategic Customer Agreements (SCAs), with 14 of those deals alone securing roughly $100 billion in cumulative baseline revenue under minimum pricing terms, locking in demand years into the future rather than leaving Micron exposed to the next downturn. CEO Sanjay Mehrotra has said tight supply conditions should persist beyond 2027, driven by both data center buildouts and a longer-term wave of demand from AI-powered humanoid robots. Despite all that growth, Micron trades at under 6x forward earnings, a fraction of the semiconductor industry’s typical multiple in the high 20s. Street has noticed that 51 of the 55 analysts covering the stock rate it a buy as of July 31, with a consensus price target implying more than 94% upside from here.
Bear Case: Cyclical History And A Fast-Rising Chinese Challenger
Memory has always been a boom-and-bust business, and Micron’s stock has suffered peak-to-trough drawdowns of 36% to 73% in every prior up-cycle once investors got too optimistic. That volatility looks different from the steadier corner of the chip supply chain occupied by equipment makers like ASML, and the latest wobble has a new trigger: Chinese DRAM maker ChangXin Memory Technologies went public in Shanghai on July 27, raising about $8.6 billion and seeing its shares surge roughly 470% on debut, instantly making it China’s most valuable listed company. CXMT still trails Micron, Samsung, and SK Hynix, but its rapid market share gains have investors worried about future pricing power. Layered on top of that is a broader market jitter about whether AI infrastructure spending from hyperscalers can keep justifying today’s prices.
Micron And ASML: Hedge Fund Holdings
That contrast between a volatile memory maker and a steadier equipment supplier shows up clearly in how hedge fund holders are positioned. Micron’s institutional holder count rose to 154 in the most recent quarter from 137 previously, and ASML Holding’s (NASDAQ:ASML) climbed even further, to 133 from 101. Short interest tells a similar story of limited skepticism: Micron sits at 3.21% of shares outstanding, elevated for the stock’s own history but still modest, while ASML sits at just 0.29%. Where the two diverge sharply is valuation. Micron trades at about 5.3x forward earnings as of August 2, a level that assumes today’s extraordinary profits are largely temporary. ASML, the near-monopoly supplier of the extreme ultraviolet lithography machines used to make advanced chips, trades at roughly 36x forward earnings, a premium reflecting steadier, less cyclical demand.
Cheap For A Reason, Or Cheap By Mistake?
Micron’s low earnings multiple looks could present an opportunity if AI demand keeps profits and memory pricing elevated. However, its history and rise of competitors explain why investors remain cautious. ASML’s steadier premium multiple is the market’s way of paying for predictability, something Micron has never offered for long. If AI demand holds pricing power into 2027, the valuation gap should close. If it fades sooner, Micron’s history of sharp drawdowns suggests the next leg down may already be starting.
While we acknowledge the risk and potential of MU and ASML 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 ASML and that has 10,000% upside potential, check out our report about this cheapest AI stock.
READ NEXT: CXMT’s Blockbuster IPO Hits MU, SNDK and WDC—Is the Memory Rally at Risk? and Markets are Missing This: Apple Stock Offers a Different Way to Bet on the Future of AI
Disclosure: None. Follow Insider Monkey on Google News.
Hedge Fund Resource Center