The Micron Technology logo adorns a company building.
Upbeat analyst updates signal growing confidence that the AI supercycle is creating a sustained and profitable environment for the memory industry.
Growing demand for high-bandwidth specialized memory is eating into production capacity, creating a supply shortage for many of Micron’s products.
Record financial results and multi-year timelines for new plant construction suggest that the current favorable market conditions are sustainable and sustainable.
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A significant vote of confidence from Wall Street has turned its head back on Micron Technology (NASDAQ: MU ). Morgan Stanley recently raised its price target on the memory chip maker to a remarkable $338, reinforcing its overweight rating and signaling confidence in the stock’s continued upside.
This move is more than an update – it’s a recognition of a powerful dynamic reshaping the semiconductor sector: the AI-powered memory supercycle.
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The memory industry has long been defined by its notoriously volatile boom and bust cycles.
In 2023, the sector was in deep decline, with collapsing demand due to the post-pandemic decline in PCs and smartphones leading to oversupply and financial losses.
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But the current cycle is proving to be different.
This time, the engine is not a temporary product refresh, but a structural and sustained demand from the artificial intelligence (AI) infrastructure, which requires unprecedented amounts of high-performance memory to run.
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This fundamental change creates a new set of rules for the industry, with Micron positioned squarely at the center.
At the heart of the AI revolution is a specialized product called High-Bandwidth Memory (HBM). HBM is a crucial component in powerful graphics processing units (GPUs) that train and run AI models. It works by stacking DRAM chips vertically, like the floors of a skyscraper, and connecting them with thousands of data paths.
This architecture enables much faster data transfer speeds, which are essential for powering massive AI models.
However, this complexity comes at a high cost for production capacity.
Producing one gigabit of HBM requires much more silicon than producing one gigabit of conventional DDR5 DRAM, the memory found in most servers, computers and phones.
The complicated vertical stacking and larger base logic die required for HBM means it consumes much more board space.
As Micron and its competitors pivot their limited and high-end production lines to meet the incredibly profitable demand for HBM, they are running out of production capacity for standard memory.
This dynamic creates a powerful ripple effect. The AI boom is creating a supply shortage not just in the high-end HBM segment, but across the entire memory landscape. With less space available from the factory for DDR5, prices for memory used in traditional data centers, computers and mobile devices are also increased. This is a classic case of a rising tide lifting all boats, and is a key reason why the current cycle is so strong for the entire Micron business.
This theory of supply is already translating into tangible, record financial performance. The evidence is clear in Micron’s fiscal Q4 2025 results, which demonstrate how effectively the company is capitalizing on this favorable market environment.
Record revenue: For the fiscal year ending in August 2025, Micron reported total revenue of $37.4 billion, a massive 49% year-over-year increase. This increase is a direct reflection of higher shipment volumes and, more importantly, stronger pricing.
Explosive profitability: The strongest indicator of pricing power is gross margin expansion. After suffering from negative margins during the 2023 recession, Micron’s non-GAAP gross margin increased from 22% in fiscal 2024 to 41% in fiscal 2025. Even more telling is the company’s guidance for the first quarter of fiscal 2026, which projects margins of 51.5%, not a level of profitability seen in years.
AI as the main driver: The engine behind this growth is undeniable. Micron’s Data Center business, which includes HBM and other high-performance server products, now accounts for 56% of the company’s total revenue, highlighting the fact that AI development is the main driver of these record results.
For investors, the key question is sustainability. The supply side of the equation provides the simplest argument for why this cycle has a multi-year track. Building advanced semiconductor manufacturing plants, or fabs, is one of the most complex and expensive industrial undertakings in the world, providing a natural barrier that prevents supply from catching up with demand overnight.
These plants are multi-billion dollar projects that take years to build, equip and ramp up to volume production. Micron’s US expansion plans, supported by the CHIPS Act, provide a perfect illustration of this structural gap. The company’s new state-of-the-art plant in Boise, Idaho, which is currently under construction, is not expected to produce its first commercial wafers until the second half of 2027. The even larger project planned for Clay, New York, will begin ramping up production only after the second Idaho plant is completed, placing its significant production closer to the 2030 timeframe.
This multi-year lag between capital investment and actual wafer production creates a sustainable window where demand from AI and other markets will likely continue to exceed the industry’s ability to supply it. For Micron, this structural lag acts as a moat, protecting the favorable pricing environment that drives its record profitability. While the memory business will always have its cycles, the robust and sustained demand from AI, combined with a slow structural supply response, suggests that the current boom is built on a stronger and more sustainable foundation than those of the past.
The article “Micron’s $338 Target: AI Memory Supercycle Just Beginning” was originally published by MarketBeat.
