One of the first market truths I learned over my 30 years navigating Wall Street was that semiconductor demand is cyclical. When times are good, orders and prices surge, driving suppliers to ramp up capacity too quickly, which contributes to oversupply when demand softens. Rinse. Repeat.
Get the timing of those cycles correct, and investors can make a significant amount of money, particularly in memory makers like Micron, which is historically prone to the boom bust cycle.
While nobody rings a bell signaling the official start and end of demand supercycles, those who pay attention to things like spot market pricing are increasingly starting to pound the table that we may be on the cusp of a critical inflection point for Micron (MU), including Wall Street research firm Stifel.
This week, Stifel analyst Brian Chin put the situation at Micron bluntly, writing in a research report shared with TheStreet:
Chin notes that surging spending on data centers to outfit them with hardware necessary for handling artificial intelligence workloads has proven a “tipping point” for the memory market, causing prices to swell, and in turn, leading him to ratchet his Micron stock price target up by an eye-popping 54% ahead of its earnings next week.
His higher target is the latest among a slate of recent Wall Street peers, suggesting many are behind the eight ball and rushing to catch up.
Memory prices are surging in 2025 due to growing demand for artificial intelligence servers.Shutterstock.
Hundreds of billions have been spent over the past three years upgrading data center servers to better handle the heavy workloads associated with training and running large language models, such as ChatGPT, and agentic AI apps tasked with boosting worker productivity.
In 2025 alone, I/OFund says hyperscalers capex will be $405 billion.
The rush of activity has been a boon for Nvidia, the semiconductor company behind the chips most effective at AI, and server companies, like Dell, which are building more powerful computers packed with Nvidia’s GPUs to meet hyperscaler demand.
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“Training is significantly and increasingly compute-intensive, but early LLM demands were manageable. Today, compute needs are accelerating rapidly, particularly as more models move into production,” wrote JP Morgan strategist Stephanie Aliaga in October. “Nvidia estimates that reasoning models answering challenging queries could require over 100 times more compute compared to single-shot inference.”
The sheer horsepower necessary to fulfill AI’s mission is now spreading beyond early pick-and-shovel plays, like Nvidia and Dell, to interconnect products used to link systems together and memory used to make AI servers run more efficiently.
In its latest earnings call, Dell acknowledged the impact of rising demand on memory, citing the memory market as an increasing pain point.
“We’re in a very unique time. It’s unprecedented. We have not seen costs move at the rate that we’ve seen. And by the way, it’s not unique to DRAM. It’s NAND,” said Dell Vice Chairman Jeffrey Clark.
The spot price market has seen memory prices surge higher since the summer. As those prices are reflected in contract renegotiations, it will offer a significant bottom-line-friendly profit for Micron.
Stifel’s Chin updated his outlook for forward gross margins and profits, and the size of the increase, which is expected to accelerate in each of the next two quarters, was enough to justify a major increase in Micron’s stock price target to $300 from $195.
“Memory prices are rallying hard into year-end. Next week, we expect Micron to report and guide for meaningful upside to its F1Q(Nov) results and F2Q(Feb) outlook,” wrote Chin. “In the short run, operating at higher utilization and lower inventory, output is more fixed and the concern for Micron is not about too much supply but rather too little.”
That’s a good problem to have if you’re Micron. Stifel believes that Micron will exceed its quarterly results when it reports on December 17.
It expects revenue and non-GAAP earnings per share of $13.1 billion and $4.12, respectively. That’s nicely above Wall Street consensus for $12.8 billion and $3.91, and much higher than Micron’s own guidance for at least $12.2 billion and $3.60.
The profit outperformance will be driven by gross margins expanding 7.8% quarter over quarter to 53.5%, which is above the high end of its guidance of 50.5% to 52.5%. The results model for 15% sequential sales growth, with price being the major driver, rather than unit volume.
Importantly, Chin believes that Micron will acknowledge that “contract pricing is broadly strengthening into year-end,” providing upside for its outlook for the current quarter.
For the upcoming fiscal second quarter, Stifel thinks the company can deliver $14.9 billion in sales and $5.09 in EPS. Again, that’s better than Wall Street consensus, which is pegged at $13.9 billion and $4.56.
Gross margin could improve another 4% from fiscal Q1 to 57.5% and further out, Stifel’s analysts write, “we believe Micron Cloud Memory (CMBU) GMs could expand into the mid-60s (59% in F4Q).”
The outlook suggests compelling sequential top- and bottom-line growth, a perfect recipe for investor gains, given that stocks tend to follow revenue and profit over time.
Stifel is far from the only firm boosting targets and touting a bullish tone. Goldman Sachs’ analysts expect Micron to deliver third-quarter revenue of $13.2 billion and earnings of $4.15 per share as “pricing strength should drive upside to quarter, positioning the company well for 2026.”
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