Artificial intelligence accelerators developed by corporations like Nvidia and Broadcom require extra reminiscence than conventional processors. That has made reminiscence chip producer Micron Technology (MU 4.89%) one of many hottest shares available on the market.
Demand for reminiscence chips has led to an unprecedented provide scarcity, inflicting costs to skyrocket. Indeed, dynamic random entry reminiscence (DRAM) costs have almost tripled over the previous yr, in accordance with The Wall Street Journal. And Micron inventory has superior 350% to $423 per share over the identical interval.
Here’s my prediction: Micron will commerce round $554 per share after the corporate delivers its fourth-quarter monetary report in late 2027. That implies 31% upside from its present share worth.
Image supply: The Motley Fool.
Micron reported distinctive monetary leads to the second quarter
Micron is a semiconductor company that develops reminiscence and storage options for private computer systems, cellular gadgets, data center servers, and automotive programs. It is the third-largest producer of DRAM reminiscence merchandise, together with the high-bandwidth reminiscence (HBM) and NAND flash reminiscence merchandise behind South Korean corporations Samsung Electronics and SK Hynix.
Micron reported distinctive monetary leads to the second quarter of fiscal 2026 (ended Feb. 26). Revenue elevated 196% to $23.8 billion, pushed by file gross sales in DRAM, HBM, and NAND reminiscence merchandise. Non-GAAP internet earnings elevated 682% to $12.20 per diluted share. But the inventory declined following the report as a result of buyers are unsure how lengthy the great instances will final.
The reminiscence chip trade is outlined by boom-and-bust cycles
Memory chips are commodities in that little differentiation exists between merchandise from totally different suppliers. That means reminiscence chip producers compete totally on worth, which itself is decided by supply and demand.
Historically, the reminiscence chip trade has oscillated between provide shortages that drive costs greater and provide gluts that drive costs decrease. That occurs as a result of suppliers like Micron enhance manufacturing capability throughout inflection factors that enhance demand. That is an costly and time-consuming endeavor, however provide finally outpaces demand, which explains the cyclical nature of the trade.
The final inflection level was the COVID-19 pandemic. Demand for reminiscence chips began to extend in mid-2020 as companies shifted towards distant work, creating a necessity for extra private computing gadgets and information middle capability. Memory chip costs peaked in 2022 earlier than falling considerably in 2023, at which level suppliers lower manufacturing capability to maintain costs above manufacturing prices.
In the aftermath, reminiscence and storage corporations hesitated enhance manufacturing capability because the artificial intelligence (AI) growth took form, in accordance with Thomas Coughlin, a know-how marketing consultant who specializes within the information storage trade. “There was little or no investment in new production capacity in 2024 and through most 2025.” That was the foundation trigger of the present provide scarcity.
Today’s Change
(-4.89%) $-21.74
Current Price
$422.53
Key Data Points
Market Cap
$476B
Day’s Range
$415.38 – $449.05
52wk Range
$61.54 – $471.34
Volume
54K
Avg Vol
36M
Gross Margin
58.54%
Dividend Yield
0.11%
Wall Street expects Micron’s earnings to peak in 2027
Currently, reminiscence chip suppliers Micron, Samsung, and SK Hynix are racing to extend manufacturing capability, and several other new wafer fabrication amenities and packaging crops are anticipated to be operational by 2027. It could take time for provide to match demand, however the market could begin wanting via demand at that time to the availability glut that’s positive to observe.
Micron inventory at the moment trades at 19 instances adjusted instances earnings, an inexpensive valuation for an organization whose adjusted earnings elevated greater than 600% final quarter. But I feel the market will afford Micron a less expensive a number of as soon as further reminiscence chip manufacturing capability comes on-line. This is the place my anecdote concerning the post-pandemic provide glut is related.
Micron reported strong monetary leads to fiscal 2022. Revenue elevated 11% to a file $30.8 billion, and non-GAAP internet earnings soared 38% to $8.35 per diluted share. Yet, shares traded at simply 6 instances adjusted earnings after the corporate’s report as a result of the market was anticipating the post-pandemic provide glut.
This time round, Wall Street nonetheless expects Micron’s adjusted earnings to peak at $92.35 per diluted share in fiscal 2027 earlier than declining 78% to $20.57 per diluted share in 2029. If the market affords Micron the identical valuation a number of that it did when the final reminiscence chip cycle peaked (i.e., 6 instances adjusted earnings), the inventory will commerce at $554 per share in late 2027, assuming Wall Street’s ahead earnings forecast is appropriate.
