Micron (NASDAQ:MU) has been one of the stock market's biggest winners during the AI boom, with soaring demand for high-bandwidth memory (HBM) chips transforming both its financial performance and share price.

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But has Micron become too expensive? While bullish investors argue that AI memory demand is still in its early stages, others believe expectations have become overly optimistic after the stock's 720% surge over the past year, even after the recent dip.

One investor who falls into the bearish camp is Paul Franke. Interestingly, Franke held the opposite view just a few years ago, when he described Micron as one of the semiconductor sector's best bargains. Although he admits he underestimated the magnitude of AI memory demand, the investor now argues the investment case has completely reversed. In fact, Franke says Micron now occupies the "exact opposite investment position" compared with 2022, adding that he would "Sell/Avoid the stock" until investors are offered a much more attractive entry point.

According to Franke, the concern is not Micron's business but its valuation. The investor believes investors have become overly focused on the company's impressive earnings growth while overlooking the highly cyclical nature of the memory industry. In his opinion, many investors have become "blinded to any bad news or industry cycle downturn," leaving the shares vulnerable if AI spending slows or industry conditions become less favorable.

Rather than focusing on earnings alone, Franke points to valuation measures such as enterprise value relative to revenue, tangible book value, and free cash flow yield. Those metrics, in his view, suggest Micron is trading at levels that exceed even the dot-com era despite the company's need to continue investing heavily in manufacturing capacity. From his perspective, investors are paying premium prices for earnings that may prove difficult to sustain through a full semiconductor cycle.

Franke is also skeptical that today's pace of AI investment will continue indefinitely. While he does not argue the AI boom is ending, he cautions investors, "Don't say an 'unexpected' slowdown is impossible for the AI boom." He believes reports of scaled-back data center projects and growing scrutiny over AI spending suggest the market may be assuming too much about future demand.

Taken together, those factors leave Franke with one clear conclusion: "If you invest based on statistics and mathematical odds, Micron is an easy Sell."

Although the investor acknowledges the stock could continue climbing, he argues "a lot would have to go right" for Micron to justify its current valuation, including sustained AI demand, continued pricing strength, and limited competitive pressure.

Franke's boldest prediction concerns just how far the shares could fall if sentiment changes. "Don't laugh," he writes, before suggesting Micron could trade below $500 per share within the next year or so. While he concedes that outcome is far from certain, he estimates there is only "maybe a 10% to 15% chance" that the company delivers the nearly perfect conditions required to support or exceed today's valuation.

For that reason, Franke believes investors are better off waiting for a much deeper pullback before considering the stock. Unsurprisingly, the investor rates Micron shares a Sell. (To watch Franke's track record, click here)

Wall Street, however, remains far more optimistic than Franke. Micron enjoys a Strong Buy consensus rating based on 30 analyst reviews, including 29 Buys and just one Hold, with no Sell ratings. The average 12-month price target of $1,563.93 implies ~59% upside from current levels. (See MU stock forecast)