Memory demand exceeds all forecasts

The artificial intelligence revolution is fueling an unprecedented demand cycle for Micron Technology, with the memory chip maker consistently exceeding the market’s most optimistic expectations. A critical shortage of high-performance memory has caused the company to significantly raise its financial forecasts, prompting analysts to revise price targets upwards and establish Micron as an indispensable pillar of AI infrastructure.

For investors, the highlight is Micron’s extraordinary visibility, focused on its high-bandwidth memory (HBM) products. These specialized components are essential for AI accelerators, including those from industry leader Nvidia. The company reported that its entire HBM production capacity is exhausted through the end of calendar year 2026. This “memory crisis” is structural; About 30% of current final demand cannot be met due to capacity constraints, giving suppliers like Micron formidable pricing power.

This dynamic is directly reflected in aggressive financial projections. For its second fiscal quarter 2026, management now expects revenue of around $18.7 billion, a substantial jump from the previous consensus estimate of $14.46 billion. The adjusted earnings per share (EPS) forecast, with a midpoint of $8.42, nearly doubles prior expectations of $4.49. The gross margin outlook for the second quarter stands at around 68%, highlighting the favorable imbalance between supply and demand.

Key financial indicators:
– Revenue for the first quarter of the 2026 financial year: $13.64 billion (year-over-year growth of approximately 56.7%)
– Adjusted EPS for the first quarter of fiscal 2026: $4.78
– Revenue guidance for the second quarter of fiscal 2026: ~$18.7 billion (consensus was $14.46 billion)
– EPS Forecast for Q2 FY2026: ~$8.42 (compared to $4.49 expected)
– Gross margin guidance for the second quarter of fiscal 2026: ~68%

Analyst consensus catches up with reality

The revised outlook forced a rapid reassessment on Wall Street. Analysts are significantly improving their models and pricing targets to align with the new reality of AI-driven memory demand.

In a notable move on Dec. 23, Rosenblatt Securities analyst Kevin Cassidy raised his price target for Micron shares from $300 to $500, citing an AI-driven supply shock in the memory market. Other institutions followed suit. Morgan Stanley recently increased its target to $325, noting that the memory cycle is entering a new phase fueled by massive data center expansion. The prevailing analyst view suggests that the structural imbalance in DRAM supply is not expected to ease until mid-2026 at the earliest, providing a sustainable runway for high pricing and profitability.

Should investors sell immediately? Or is it worth buying Micron?

Capitalizing on the cycle: major investments underway

To ease the bottleneck and capture more of the growing demand, Micron is aggressively increasing its capital spending. Planned capital investment (CapEx) for fiscal 2026 is expected to be around $20 billion, up from $13.8 billion the year before. These funds aim to create additional production capacity and ensure the company’s technological leadership in the competitive HBM segment.

Insider activity mid-rally

The substantial share price appreciation – the stock is up more than 170% in the last twelve months and recently traded near €234, close to its 52-week high – has been accompanied by notable insider selling. Over the previous 90 days, the company’s officers and board members collectively sold 369,852 shares. Significant transactions included the sale of 126,000 shares by Chief Financial Officer Mark J. Murphy and 5,000 shares by board member Steven J. Gomo.

Although such sales are not uncommon after a strong rally and are often linked to personal financial planning, the market monitors them to understand how management views current valuation levels. They are not necessarily a negative long-term signal about the company’s prospects.

Evolution of market perception and valuation

Micron’s investment thesis appears to be in transition. The company is increasingly seen not only as a supplier of cyclic memories, but also as a crucial infrastructure provider for the AI ​​economy. This change reshapes its valuation framework.

Based on trailing twelve month earnings, the price-to-earnings (P/E) ratio stands at approximately 26. However, when applying the steeply inflated forward earnings estimates, the forward P/E multiple contracts to a more modest level. Key to maintaining its re-rated valuation will be Micron’s ability to implement its planned capacity expansions and successfully leverage the prolonged shortage in the DRAM and HBM markets to maintain high margins.