RBC Capital Markets has issued a research report increasing the price target for Micron Technology (MU.US) from $425 to $525, while maintaining an "Outperform" rating. The upgrade is based on optimism regarding the memory chip supercycle. An analyst team led by Srini Pajjuri stated, "Given the continued strength in memory chip pricing, we are significantly raising our earnings estimates. The core question now is the duration of this cycle—our base case is that price increases will persist through 2026. Although DDR prices may eventually moderate, the pricing advantage of HBM and increased capacity per unit are expected to provide sustained benefits, supporting the cycle into 2027." The analysts further noted, "It is important to highlight that structural drivers, including robust data center demand for HBM, DDR, and enterprise SSDs, are playing an increasingly critical role in this supercycle. As the cycle's sustainability becomes clearer, we anticipate potential for further valuation multiple expansion." The analyst team believes that strong demand from AI and data centers could extend this upward cycle until 2027. Data centers already account for half of DRAM industry revenue, and demand from AI for HBM and DDR memory is projected to remain strong through 2027. Pajjuri's team added that Micron's management recently indicated that HBM capacity for 2026 is already sold out, and the next-generation HBM4 memory is progressing on schedule, with mass production and delivery expected by the first quarter of 2026. They forecast that HBM3E memory prices will see a moderate decline in 2026, while HBM4 pricing is expected to be 30% to 50% higher than HBM3E. Looking ahead, the team projected, "As contracts are renegotiated in 2027, HBM prices are likely to climb further. Concurrently, each successive generation of GPU/XPU is seeing a significant increase in HBM capacity, a trend expected to continue through 2027 and beyond. DDR memory capacity in AI servers is also rising substantially, driven primarily by increased inference workloads and expanding context windows." The analysts concluded that even if demand from the PC and smartphone markets remains weak, growth from AI and data center demand should be sufficient to offset the impact. In the NAND flash sector, driven by Retrieval-Augmented Generation and agent AI applications, demand is expected to consistently outpace supply through 2026. Micron Technology is scheduled to report its fiscal 2025 second-quarter earnings on March 18, Eastern Time.
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