Why Micron (MU) Stock Is Up Today and Why BofA Thinks It Can Still Go Higher

After a huge AI-boosted rally, Micron (NASDAQ:MU) stock finally took a breather in Tuesday’s session, although it looks like that might have been just a brief pause before the resumption of upside.

As has so often been the case over the past year, MU shares are pushing higher again on Wednesday, the uptick coinciding with the latest note on the chip industry from BofA’s Vivek Arya, an analyst who ranks among the top 1% on Wall Street.  

Along with raising his CY30 AI data center TAM forecast to approximately $1.7 trillion, up from the previous estimate of roughly $1.4 trillion, Arya keeps a bullish stance on AI memory. “Despite recent runs in memory stocks, we expect memory demand to continue outgrowing supply driven by AI, memory pricing to generally hold up (supply/demand sufficiency ratio not expected to rise above 110%), and memory (MU) earnings to remain relatively stable through CY28,” the 5-star analyst said.

Arya points out that memory capacity and bandwidth are increasingly emerging as the key constraints in AI inference workloads, whereas historically compute power was typically the primary bottleneck. In particular, Arya highlights that AI model context windows are expanding at a much faster pace than model compression can compensate for. “In other words,” he explained, “the raw demand for memory is increasing faster than various software/hardware abilities to compress and/or distill the amount of memory used during the inference process.”

Furthermore, because of constraints around capital, packaging, and power, Arya believes memory supply elasticity is now “structurally lower,” meaning supply is no longer able to increase as easily or as quickly as it used to. As a result, he expects “memory vendors (demand) to outperform equipment vendors (supply) over the medium term.”

Accordingly, Arya maintained a Buy rating on the shares and raised his price objective from $500 to $950, reflecting a significantly stronger medium-term pricing outlook. The new target suggests the stock will gain another 18% over the coming months. (To watch Arya’s track record, click here)

Of note, Arya’s updated valuation is based on a sum-of-the-parts framework that assigns ~$240 per share to Micron’s more durable AI and HBM business, using a 27x CY27 P/E multiple in line with AI compute peers, while valuing its traditional cyclical DRAM and NAND operations at ~$710 per share based on a 3.1x CY27 P/B multiple, consistent with prior industry upcycles.

Elsewhere on the Street, 26 other analysts are also positive on Micron’s prospects, while 3 Holds can’t detract from a Strong Buy consensus rating. However, given the huge gains (up 691% over the past year), the $608.33 average price target now sits 24% below the current share price. Considering this discrepancy, keep an eye out for either further price target hikes or rating downgrades shortly. (See MU stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.