Micron Technology (MU) opened in the red on March 19, even after posting a blockbuster Q2 release, featuring a nearly 200% year-over-year increase in revenue to $23.86 billion.
Investors are reacting primarily to geopolitical supply risks and CEO Sanjay Mehrotra’s comment that capital expenditures will “step up meaningfully” this year.
Year-to-date, Micron stock remains up about 45%, with analysts seeing potential for significant further upside as it transitions from a cyclical player to a permanent artificial intelligence (AI) infrastructure cornerstone.
Micron now sees its capex reaching $25 billion this year and pushing even higher in fiscal 2027.
This triggered fears that the current memory pricing boom may not last long enough to justify such a massive investment.
Adding to the pressure on MU shares is an attack on Qatar’s Ras Laffan industrial complex. As a global linchpin for helium, a critical gas for cooling silicon wafers, the facility going offline threatens to increase production costs and squeeze margins.
These dual concerns have sparked peak cycle anxieties among cautious investors, forcing them to “sell the news” on Thursday.
Despite aforementioned risks, Barclays’ senior analyst Tom O’Malley remains bullish on Micron shares, raising his price target on the memory chips specialist to $675 on Thursday.
In his research note, O’Malley said the extremely tight supply-demand outlook for both DRAM and NAND offers “no indication of this train slowing down in the near-term.”
On the earnings call, MU announced its first five-year Strategic Customer Agreement (SCA) versus long-term deals of typically one year, which he believes signals “further stability and visibility” ahead.
Additionally, O’Malley cited management’s guidance for the free cash flow to double sequentially in Q3 as a major positive that warrants buying this AI stock at the current price.
Other Wall Street analysts agree with O’Malley’s positive view on MU stock, especially since it’s trading at an attractive 13x forward earnings only.
