MW Micron's stock has boomed on AI optimism. Now comes the 'tricky part.'
By Britney Nguyen
One analyst says the next leg of the Micron rally needs to come from something other than what's driven the stock up so sharply over the past year
Micron's stock was down more than 6% on Tuesday.
Can Micron's stock sustain its explosive rally over the long haul? That might require a different catalyst than what's helped the stock boom so much over the past year.
The memory-chip maker $(MU)$ has benefited from a supply-and-demand imbalance that has allowed it to raise prices for components. With the crunch expected to last for several more quarters, companies are turning to long-term agreements to secure supply, affording the company ample pricing power. Micron's agreements seem to be focused on ensuring a gross margin in the 60% to high-80% range, TD Cowen analyst Krish Sankar said.
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However, memory is currently in "a tricky part of the cycle," he said in a Monday note. Micron's profits have boomed as the company has cashed in on the extreme supply crunch by boosting prices. But soon, the opportunities to do that may not be so dramatic.
Sankar said that, while demand remains strong, he doesn't see much upside to his estimates for Micron's earnings per share in 2027 to reach $110. That would imply a dramatically lower earnings growth rate in 2027 than the nearly 600% clip implied by the FactSet consensus for 2026.
Now, the sustainability of memory demand is what will be crucial to keeping the stock's momentum going. "The next leg for the stock is more about durability than earnings upside," Sankar said in his note to clients.
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Micron's stock was down more than 6% on Tuesday following a Wall Street Journal report that OpenAI had missed internal targets for revenue and user growth. The stock is up about 526% over the past year.
Granted, Sankar noted that growing demand for central processing units should "help the duration narrative for" dynamic random-access memory. Before the AI boom, Sankar said demand was mostly driven by memory content per CPU, and the number of CPU units.
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Now, server CPUs are in hot demand as they've become crucial to running AI models and agentic AI applications. While AI training workloads require one CPU for every eight graphics processing units, Intel said on its earnings call last week that the ratio could flip as workloads shift to inference.
"If Intel's view of CPU-to-GPU reaching parity with agents proves right, we think that can help elongate the memory cycle," Sankar said.
In his view, Micron's shares "will continue to work as long as we have signs of demand that support the durability thesis." He sees that improving Micron's stock multiple.
Meanwhile, D.A. Davidson managing director Gil Luria said he sees "meaningful upside" for Micron's stock on its leading-edge DRAM and NAND memory chips, and his view of "a long-duration earnings-power story."
Demand for AI has created "a longer-than-usual memory cycle" that has led to "a structurally higher ceiling for memory pricing and demand," Luria said in a Tuesday note. He initiated coverage of Micron's stock with a buy rating.
Unlike previous memory cycles, this one features the rise of multiyear strategic collaboration agreements, which allow memory customers to lock in supply, offering more visibility into demand.
"We are not arguing that there isn't a cycle, just that the duration and extent of the cycle may not be priced in properly," he said.
Luria's $1,000 price target for Micron represents upside of about 103% from its price of about $492 on Tuesday afternoon.
-Britney Nguyen
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April 28, 2026 13:13 ET (17:13 GMT)
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