For decades, memory chips followed a painful script.
Companies expanded capacity amid rising demand, translating into higher margins. A few years later, slowing demand meant an oversupply of products, which drove profits down.
Artificial intelligence may be tearing up that script.
And one of Wall Street’s most closely followed chip analysts just weighed in on whether Micron’s remarkable run has room left.
Why Micron stock rides the AI memory boom
Every AI model needs a ton of memory driven by bigger models, longer conversations, and a widening user base.
Micron (MU) Chairman and CEO Sanjay Mehrotra put it plainly on the company’s Sept. 30 earnings call. AI platforms deliver more value with more memory and faster memory.
That demand has turned Micron into a cash machine. Fiscal 2026 revenue reached a record $133.2 billion, up 256% from the prior year, CFO Mark Murphy said on the call.
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Gross margin expanded to 81.1%, a 40-point jump, while earnings per share soared 811% to $75.52. The fiscal fourth quarter, which ended in August, was even stronger:
- Revenue: A record $54.2 billion, up 379% from a year earlier and the sixth straight quarterly record
- DRAM revenue: A record $39.8 billion, or 73% of total sales
- Data center SSD revenue: Nearly $10 billion, more than 10 times the level a year earlier
- Gross margin: 87%, up 2.1 percentage points from the prior quarter
- Free cash flow: $33.2 billion
Micron expects fiscal first quarter revenue of $61.5 billion and earnings of $38.15 per share.
The forecast came in well above what Wall Street analysts expected, which was $57.4 billion in revenue and $35.47 per share, according to a Morgan Stanley research report shared with me.
Morgan Stanley holds its Micron stock price target
Morgan Stanley analyst Joseph Moore kept an “Overweight” rating and a $1,200 price target on Micron in an Oct. 1 research note titled “Micron makes the case that it’s better for longer.”
At the time of writing, MU stock trades at $1,074, so the target implies about 10% upside.
The firm did reset its numbers, though.
Morgan Stanley lifted its fiscal 2027 earnings estimate to $182.52 per share from $168.52. Its revenue forecast climbed to $281 billion from $266.9 billion.
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“We said in our preview and in recent notes that the debate has shifted from ‘how good can it get’ to ‘how long it can stay good,'” Moore wrote.
Here’s the twist. Micron’s beats are getting smaller. Over the prior three quarters, it topped consensus earnings estimates by 20% to 40%. This time, the beat was 5% and guided 6% above consensus.
Moore doesn’t see that as a red flag. He thinks it may be “the new normal as Micron’s visibility improves.”
Why Micron’s supply crunch matters
Building memory capacity takes years, clean rooms take a long time to construct, and production ramps slowly, even after the first wafers roll out.
Mehrotra offered the most striking comment of the call. “Even with additional industry DRAM clean room space plans with robust demand trends, including new upside requests from customers, we do not have line of sight to when supply and demand will return to balance.”
Customers are acting on that fear. Micron has signed 26 strategic customer agreements, known as SCAs. These are multiyear take-or-pay deals that lock in supply.
Related: Micron’s memory boom faces a new test
Customers have committed $32 billion, mostly cash deposits. Mehrotra said more than 75% of Micron’s 2027 output is already spoken for.
Moore called the longer contracts “a testament to the customer anxieties about securing DRAM even 5 years from now.”
He added that, on Morgan Stanley’s new estimates, Micron will earn close to half its current $1.23 trillion market value by the end of 2028.
Murphy said Micron plans to return 100% of its excess cash to shareholders over time, with a step up starting Dec. 9.
ANDREW CABALLERO-REYNOLDS / Getty Images
What could cool the Micron stock price
The rally hasn’t been linear. Moore said investors trimmed bullish forecasts in July for a few reasons.
A trillion-dollar memory market can’t keep raising prices at this pace forever. Long-term contracts include price ceilings. And AI customers are learning to do more with less memory.
The once popular $300 earnings call now looks less likely, Moore said. Morgan Stanley sees about $200 for calendar 2027 and calls that conservative.
The firm’s bull case puts the stock at $1,650. Its bear case, where memory slides into a downturn in 2027, sits at $675.
Two catalysts remain. Repricing of high bandwidth memory, or HBM, could add roughly $9 to quarterly earnings per share, Moore estimated. A larger buyback authorization is also coming.
For a business famous for boom and bust, “better for longer” might be the most bullish phrase of all.
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