Micron is "making great strides," but the "shadow of history" is beginning to cast a pall over its prospects, raising concerns about future challenges and uncertainties in its development trajectory.

Micron Technology’s stock price hits an extreme technical indicator record, with the current deviation from the long-term trend line surpassing peak levels seen during the Internet bubble and the Windows 95 boom. Historical data shows that this signal often precedes a significant pullback.

In recent months, Micron has experienced a parabolic rise, with January marking its largest single-month increase since February 2000—just before the burst of the Internet bubble. Driven by AI-powered supply shortages and surging demand, the prices and profits of Micron and some storage companies have both risen sharply.

On Monday, Micron’s stock surged 5.5%, setting a new closing record in the past five trading days and marking its 13th all-time high this year. Wall Street is enthusiastic, with FactSet surveys showing 88% of analysts are optimistic about the stock’s future.

However, technical analysts are issuing warning signals. BTIG technical analyst Jonathan Krinsky pointed out that Micron’s stock is currently in a “historically overbought” state, with its deviation from the 200-day moving average reaching a record high. In the past two instances when the deviation approached this level, the stock subsequently entered a bear market.

Technical Indicators Flash Red

Currently, Micron’s stock price is 147% above the 200-day moving average, slightly below the 152% record high set on January 28. This widely used long-term trend tracking indicator shows that the stock has far exceeded its historical extreme range.

In comparison, during the peak of the Internet bubble in early 2000, this deviation peaked at only 98%. When Micron topped out on July 14, 2000, the deviation was 89%. Within three months, the stock plummeted 65%, and 12 months later, it was down 62%.

The previous record was set on September 11, 1995, when the deviation was 124%. At that time, Micron’s stock surged due to Microsoft’s release of Windows 95, which sparked strong demand for storage chips, leading to supply shortages and higher prices and profits—scenarios highly similar to the current AI boom. After that peak, the stock fell 42% over the next three months; 12 months later, it had dropped 77%.

Fundamentals Are Strong but Valuation Risks Remain

Micron’s recent rally is supported by solid fundamentals. The supply tightness and demand growth driven by AI applications are creating a favorable environment for the memory chip industry. This also explains why most Wall Street analysts remain optimistic.

However, technical analysts warn that despite strong fundamentals, extreme technical indicators suggest that “the good news has been fully priced in.” Krinsky from BTIG emphasized in a client report that investors should recognize that current valuations already reflect all positive factors.

Technical analysts often point out that history does not simply repeat itself. Theoretically, Micron’s stock price could further deviate from the 200-day moving average or narrow the deviation through sideways consolidation—currently, the moving average is rising about $2 per day.

Lessons from the Past

But for investors who believe “this time is different,” the investors in July 2000 and September 1995 may have thought the same. After two historical peaks, Micron’s stock experienced significant corrections, with declines of up to 77%.

Currently, Micron’s stock has hit new all-time highs consecutively, and market sentiment is high. However, the extreme deviation indicated by technical indicators is highly similar to the situations before two major corrections in history. Despite the positive fundamentals, valuation risks should not be overlooked.

For investors holding Micron shares, at minimum, they should recognize that no matter how strong the fundamentals are, the current price already fully reflects market expectations, and further upside may be limited.

Risk Warning and Disclaimer

Market risks are present; investment should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Invest at your own risk.