Micron’s AI Memory Chips Fuel Growth Despite Stock Dip

The disconnect between Micron Technology’s fundamental performance and its stock price movement has caught the attention of major financial institutions. Despite delivering robust fiscal Q4 earnings that surpassed expectations, MU shares fell sharply by over 7% in the days following the announcement. This market reaction appears to be changing as Wall Street analysts increasingly recognize the company’s positioning in the artificial intelligence ecosystem. Morgan Stanley shifted its rating to overweight while dramatically increasing its price target from $160 to $220 per share, signaling renewed confidence in Micron’s growth trajectory.

The bullish sentiment extends across multiple financial firms, with Itau BBA Securities initiating coverage with an outperform rating and a $249 per share target—placing it near the high end of industry estimates. These upgrades follow similar moves by firms like Rosenblatt, which raised its target to $250 per share. This collective analyst action demonstrates broad recognition of Micron’s AI-fueled potential, particularly as the company guides toward record Q1 2026 revenue of $12.5 billion. The consensus among these institutions suggests the initial stock dip represented a market mispricing rather than a reflection of underlying business weakness.

Micron’s strategic advantage lies in its leadership in high-bandwidth memory chips, particularly the HBM3E variety that has been fully booked through 2025. These specialized chips provide the high-speed data processing essential for training large language models and running inference tasks, making them indispensable components in AI accelerators from companies like NVIDIA. The company’s upcoming HBM4 chips promise even greater performance, positioning Micron to accelerate both revenue and margin growth in the coming years as AI infrastructure spending is projected to exceed $200 billion annually by next year.

The company’s fiscal 2025 revenue reached $37.3 billion, representing a 49% year-over-year increase, driven largely by its memory solutions for AI applications. While overall data center revenue declined 22% year-over-year in Q4, the cloud memory business specifically saw a massive threefold increase. This divergence highlights Micron’s successful strategic pivot toward high-margin, high-performance memory tailored for AI infrastructure. Management forecasts retaining its competitive edge with HBM4 chips, expecting any market share shifts to occur primarily between its rivals Samsung and SK Hynix rather than affecting Micron’s position.

Micron’s technological superiority provides tangible benefits for energy-intensive AI data centers, offering 30% better power efficiency and 50% higher capacity compared to rival solutions. In a market dominated by Samsung and SK Hynix, which collectively control approximately 60% market share, Micron’s 21% slice is growing fastest, backed by U.S. manufacturing that avoids supply chain vulnerabilities and tariff risks. With only these three companies capable of scaling HBM production amid market forecasts reaching $130 billion by 2033, Micron’s position appears secure and strategically advantaged.

At a forward P/E ratio of just 10, Micron trades at a significant discount to its peers despite demonstrating faster earnings per share expansion. This valuation disconnect becomes particularly striking when compared to NVIDIA’s 52x P/E multiple, especially given Micron’s crucial role in powering GPU systems. Analysts project Micron’s earnings will double in fiscal 2026 to $16.59 per share, suggesting the current valuation substantially underestimates the company’s growth trajectory and market dominance in the AI memory space.

The company’s financial health continues to strengthen, with free cash flow more than doubling in Q4 to $803 million. This robust cash generation helps fund HBM capacity expansions without diluting shareholders, supporting sustainable growth initiatives. With consensus price targets averaging $190 per share—implying modest 3% upside—and high-end forecasts reaching $250, the market appears to be underpricing Micron’s projected $59 billion 2026 revenue, which would represent a 43% increase. As management targets margins exceeding 50%, Micron presents investors with a rare combination of strong growth prospects and attractive valuation.