Micron (NASDAQ:MU) stock appears to be making a strong comeback after last month’s sharp pullback. Since hitting a low on July 29, the shares have climbed 31.5%, helped by what now looks like an overly aggressive selloff amid bullish industry forecasts, rapidly growing AI-driven demand for high-bandwidth memory (HBM), and expectations that structural memory shortages could persist through 2027. At the same time, concerns over competition from Chinese memory makers appear to be easing.

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Looking at the current situation, an investor with the moniker of Khaveen Investments believes Micron can continue benefiting from the surge in AI-related memory demand. However, Khaveen also sees some risks and competitive pressure ahead that make the investment case less clear-cut.

Khaveen concedes Micron’s recent growth has been impressive, with revenue up 346% year over year in FQ3. DRAM has been the biggest contributor, while NAND has also grown strongly. Within DRAM, HBM has emerged as a major growth engine, driven by soaring demand from AI data centers. Khaveen expects demand for HBM to remain strong as major cloud providers continue the AI buildout, given the need for large amounts of high-performance memory.

Memory prices have also continued to rise as demand has outpaced supply. Khaveen believes this dynamic should support Micron’s revenue and margins in the near term. The company is also significantly expanding its manufacturing capacity, particularly in the U.S., while its U.S. manufacturing investments are being supported by roughly $6.4 billion in direct federal funding under the CHIPS Act.

The manufacturing capacity expansion should allow the company to better meet growing demand. It should also give Micron a more geographically diversified production base and reduce its reliance on Taiwan. Even so, Khaveen expects supply to remain tight for certain products through 2029, suggesting favorable conditions in the memory market could persist for several more years.

While all the above points to a bullish outlook, Khaveen also highlights the competition Micron faces. It remains the third-largest DRAM supplier behind Samsung and SK hynix, and the investor expects its competitive position to weaken over time as China’s CXMT rapidly expands its production capacity.

Khaveen also sees some uncertainty around Micron’s product leadership. While the company appears capable of remaining competitive in next-generation HBM products, its planned GDDR7 speeds trail those of Samsung and SK hynix. Patent litigation is another potential downside risk.

Overall, then, while Khaveen remains positive on Micron’s long-term growth prospects, particularly because of AI-driven HBM demand and its major capacity expansion plans, the stock’s strong growth expectations are balanced by rising competition and the other risks mentioned above.

To this end, Khaveen rates MU stock a Hold (i.e., Neutral). (To watch Khaveen Investments’ track record, click here)

However, overall, the Street disagrees with that stance. While one analyst remains on the sidelines with a Hold rating, all 29 other recent reviews are also positive, making the consensus view a Strong Buy. At $1,569.07, the average target suggests shares will gain 61.5% over the coming year. (See MU stock forecast)