The increasing demand for high-bandwidth memory from AI servers is pushing memory chip manufacturers into the market spotlight. Micron's stock price has risen significantly over the past year, outperforming the S&P 500, which has also led the market to reassess its profitability and valuation.
Over the past year, a purchase of Micron stock at $500 would now be worth approximately $4,020. According to the data in the article, Micron's stock price increased by over 800% during the same period, while the S&P 500 index rose by less than 10%.
AI servers drive up demand for HBM
Micron's recent surge is primarily driven by the expansion of its AI infrastructure. Training and inference systems require higher bandwidth and lower latency memory, and Micron's HBMs are key components in high-end GPUs from companies like Nvidia.
Company management stated that HBM capacity is sold out until 2026, and demand remains strong in 2027. In addition to HBM, DRAM and NAND supply is also expected to remain tight beyond 2026.
On May 22, Micron confirmed that it had started manufacturing 1-alpha DRAM at its Manassas, Virginia facility. This is part of its $200 billion U.S. manufacturing investment plan.
Earnings growth supports stock price revaluation
The stock price increase is not solely driven by market sentiment. The article mentions that in the quarter ending February 26, Micron's revenue reached $24 billion, nearly tripling year-over-year; adjusted net profit rose to $14 billion, almost eight times that of the same period last year.
Management also stated that the company's financial outlook has further improved since the last earnings call and expects to achieve substantial free cash flow again in the third fiscal quarter.
This means that the market's repricing of Micron has shifted from simply betting on the AI concept to observing its order lock-in capabilities, profit realization speed, and cash flow performance.
UBS raises target price, shares surge
On May 26, UBS analyst Timothy Arcuri raised Micron's price target from $535 to $1625. This adjustment has become one of the most closely watched catalysts recently.
Micron's stock price rose 19.29% to $895.88 that day, marking its largest single-day gain since 2011, and the company's market capitalization surpassed $1 trillion for the first time. Analysts believe that Micron's long-term supply agreements with hyperscale cloud vendors have increased visibility into prices and demand over the next few years.
UBS projects that Micron's earnings per share will exceed $100 annually between 2027 and 2029, with profitability supported even during a relatively mild industry downturn. The firm also expects the company's cumulative free cash flow to exceed $400 billion between 2027 and 2029.
Supply bottlenecks remain a key point to watch.
As of press time, Micron's stock price was around $900, having earlier hit a new intraday high of $985. The article noted that market expectations for its price before the end of 2026 remain optimistic.
Another factor supporting this expectation is the supply constraints inherent in HBM manufacturing itself. Management stated that larger die sizes would significantly increase wafer consumption, potentially requiring more than three times the number of wafers for the same number of chips, making it difficult for supply expansion to fully keep pace with demand growth.
If this situation continues, Micron's pricing power and profit margins will remain a key focus for the market in the coming quarters.
