Elon Musk doesn’t usually hand out public compliments to chip suppliers. On Oct. 13, though, he praised Micron (MU) on X, saying the memory maker “has been reasonable regarding future memory prices, while others have been extortionate.”
The timing caught investors’ attention. Micron had just been dragged into a sharp chip sell-off after reports that China’s ChangXin Memory Technologies made key progress on a new memory design. Comments from Broadcom (AVGO) CEO Hock Tan that many AI investors “have no clue” what they own added to the pressure.
Also read: Nvidia and Micron are about to lord their successes all over Wall Street
Why Musk is praising Micron’s pricing
Musk added that pricing restraint is “something today’s customers won’t forget,” calling it “the smart move for long-term customer loyalty.”
He was replying to a post that highlighted a bullish JPMorgan note on memory, and Futurum Equities’ Shay Boloor said Micron could turn that goodwill into longer contracts and more market share, according to Benzinga.
Musk has skin in the game as a big memory buyer. Micron’s memory sits inside Nvidia chips used in his Colossus data centers, and in April, Musk named Micron as one of his existing suppliers while discussing his Terafab project. Micron and Musk’s companies have not announced a direct deal.
Memory costs are a sore spot across tech right now. AI servers are crowding out DRAM capacity, and TrendForce said in September that shortages and price increases could continue into 2027.
The contract price of a popular smartphone memory setup had nearly quadrupled in a year by February, based on an earlier TrendForce estimate. Apple has already raised prices on its newest iPhone Pro models, as reported by TheStreet.
Micron is leaning on long-term deals rather than squeezing buyers for every dollar. The company now has 26 strategic customer agreements, up from 16 a quarter earlier, and expects them to cover about 35% of its revenue through 2030. Those customer financial commitments have risen to $32 billion in total.
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A quarter that blew past Wall Street
The latest results show why customers are lining up. Micron reported fiscal fourth-quarter revenue of $54.23 billion, up from $11.32 billion a year earlier and $41.46 billion in the prior quarter, according to its earnings release. That works out to about $43 billion more than a year ago and about $12.8 billion more than three months earlier.
The beat was broad. Revenue topped analyst estimates, adjusted earnings came in ahead of forecasts, and the gross margin reached 87%, above the company’s own outlook.
Shares barely moved after the report. Its Core Data Center business carries a gross margin of about 90%, the highest of any segment.
Management sounded even more upbeat about the year ahead. “Micron delivered record fiscal 2026 results, and we expect an even stronger fiscal 2027,” CEO Sanjay Mehrotra said in the release, adding that “more than 75% of our output is already committed.” Chief Financial Officer Mark Murphy said the company has the intent to increase capital return.
The guidance backed that up. Micron forecast first-quarter revenue of about $61.5 billion, well above what Wall Street had expected, and said it expects sequential revenue growth in every quarter of fiscal 2027. It also described its gross margin outlook as a floor for the year.
Tight memory supply and a record buyback
Supply looks tight for a while yet. “Micron is on a growth trajectory for the next 3-5 years, which is what the market has not yet acknowledged,” said D.A. Davidson analyst Gil Luria, who raised his price target to $3,000 from $2,100.
He expects memory demand to outstrip supply for several years, according to Investing Live, and Micron Chief Operating Officer Manish Bhatia has called memory “the chief constraint in AI.”
Micron is preparing to resume share buybacks, though the full amount is not guaranteed to be spent. Micron’s board raised its share repurchase authorization to $35.16 billion, the largest in the company’s history. The program can start on Dec. 9, 2026.
By comparison, Micron spent just $650 million buying back 2.5 million shares in fiscal 2026, as reported by Investing.com.
More Micron:
- Morgan Stanley revisits Micron stock price target amid stellar growth
- Bank of America resets Micron stock forecast as AI ‘memory tax’ rises
- Micron just sent a stark memory chip warning to tech stock investors
The date matters because of Washington. Micron’s CHIPS Act funding agreement bars large-scale buybacks until Dec. 9, 2026, while rivals Samsung and SK Hynix have been free to repurchase tens of billions of dollars in stock, TheStreet reported.
Bank of America expects Micron to make up for lost time. Once the restrictions expire, the bank expects Micron to return all of its free cash flow to shareholders, well above the less than half that consensus assumes. BofA said that could be enough to buy back nearly 10% of the company’s market value each year.
What could trip up Micron
The stock has been bumpy lately. Micron fell more than 14% over four sessions through Oct. 13 as worries about Chinese competition and doubts about AI returns hit chip stocks, though shares were still up more than 230% this year, Reuters reported.
Big swings are nothing new here. After its June earnings report, Micron fell 41% in 35 days from its June 25 all-time high, though JPMorgan still rates the stock overweight with a $1,540 price target.
Memory has always been a cyclical business, and prices can fall quickly if supply catches up or demand slows. Higher chip costs can also squeeze device makers and weigh on demand for phones and consumer electronics.
That is exactly why Musk’s praise for Micron’s pricing restraint carries weight.
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