Financial services giant Morgan Stanley has been convinced to drop memory leader Micron ( MU ) as its top pick and replace it with Nvidia ( NVDA ). Raising doubts about the continuation of the current strong demand, John Moore, an analyst at the company, said, “There is a general perception that memory stocks are priced in a much longer and more sustainable period than processor stocks; we actually disagree a bit. Our memory conversations with customers are similar to NVIDIA, but that both are clearly clear in terms of revisions. A strong very high year at current values is considered an investment for memory, because of the above revisions. There is not much conviction about 2027 for both are very dynamic.
It should be noted that although Nvidia was chosen as the best choice, it was not done with much enthusiasm. As for memory demand, it remains as hot as ever. Although it may be past its prime, the general picture is unchanged: AI will continue to grow rapidly, data center demand will grow rapidly, and, in turn, memory demand will also grow rapidly.
Founded in 1978, Micron (MU) designs and manufactures memory and storage semiconductors, primarily DRAM (dynamic random access memory), HBM (high bandwidth memory), and NAND flash memory. While DRAM is used in servers, PCs, smartphones, and AI infrastructure, NAND is used for SSDs, mobile storage, and enterprise storage systems, and HBM is a specialized memory used in AI accelerators and GPUs.
These technologies are critical to computing performance because they determine how quickly data can be accessed and processed. Micron sells its products to hyperscale cloud providers, device makers, automotive companies and semiconductor companies that integrate memory into computing systems.
With a market value of $464.5 billion, MU stock has soared over the past year, up 338% over the previous year.
So, should investors who believe in the AI business remain happy about Micron? Short answer: Yes, and here’s why.
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Micron may have captured the imagination of the market in recent times. However, it has been steadily growing its operations at a healthy rate for years. Over the past 10 years, revenue and earnings have shown CAGRs of 10.95% and 18.93% respectively. Additionally, earnings have been directly reporting a beat for each of the past nine quarters.
Notably, the latest quarter results were also a hit, exceeding estimates for both revenue and earnings. Revenues rose 56.6% year-over-year to $13.64 billion, topping the consensus estimate of $760.74 million. All revenue segments witnessed growth, led by cloud storage and mobile businesses. While the cloud storage unit reported revenue of $5.3 billion in fiscal Q1 2026, the mobile business had revenue of $4.3 billion in the same period, with growth rates of 103.8% and 65.4%, respectively, on a year-over-year (YoY) basis. However, growth for the data center business was disappointing, with annual growth of only 4.3% to $2.4 billion.
Earnings growth did not disappoint, however, growing at a brisk 167% pace from last year to $4.78 per share, well ahead of the consensus estimate of $3.96 per share. Additionally, it was the eighth consecutive quarter that Micron reported double-digit year-over-year earnings.
Meanwhile, cash flow activities also remain strong. Net cash provided by operating activities for the quarter came in at $8.4 billion, compared to just $3.2 billion in the year-ago period. Overall, Micron closed the quarter with a cash balance of $9.7 billion, with short-term debt levels of just over $569 million.
For fiscal Q2 2026, Micron expects revenue to be between $18.3 billion and $19.1 billion, while EPS forecasts range from $8.22 to $8.62. While the midpoint for revenue would represent 132.3% growth over the previous year, the midpoint for EPS would result in an even faster growth rate of 440%.
Micron values are also negligible. While in terms of forward P/E and P/CF, its metrics at 12.10 and 9.75 are lower than the sector median of 21.97 and 16.90 respectively, the forward P/S of 6.08 is not much higher than the sector median of 3.10. Notably, the forward earnings and EPS growth rates of 57.47% and 298.22%, respectively, are much higher than the sector averages of 10.21% and 14.85%.
The global memory chip market is already a large one and is expected to grow to an even larger size. Currently at around $300 billion, the memory market is expected to reach $846.81 billion by 2033. And with a market share of nearly 25%, Micron will certainly have a decisive say in this growing market.
Micron has developed a strategy focused on leadership in memory and data storage technologies, which positions it as a vital supplier to the rapidly expanding AI ecosystem. The company maintains a comprehensive presence across the memory spectrum, offering solutions for everything from consumer mobile devices to high-performance data center computing. However, its primary emphasis is on serving data center operators with HBM products, particularly HBM3E and the upcoming HBM4. Micron’s HBM3E variant stands to consume approximately 30% less power than competing offerings, a significant advantage for data center operators focused on energy efficiency and operating costs.
The company also achieved a clear technological lead in NAND flash through early mass production of 232-layer and 276-layer technologies using CMOS-under-Array (CuA) architecture. This design enables more vertically integrated architectures and significantly smaller die sizes than peers, resulting in the industry’s highest areal density (over 14.6 Gb/mm²). For enterprise SSDs critical to AI training workloads, this translates to higher capacity drives (64TB and 128TB) that offer better quality of service and lower latency than Samsung’s V-NAND alternatives. Thus, by prioritizing bit efficiency over absolute bit volume, Micron captures high-margin feature segments where performance specifications, rather than price alone, determine design wins.
On the capital front, Micron is pursuing aggressive expansion, with a particular focus on US-based manufacturing amid ongoing geopolitical uncertainties. Management has outlined plans for a major new facility in New York state, along with significant investments of about $200 billion in two Idaho plants, four New York plants, and significant upgrades to its largest facility in Virginia ($150 billion for production capacity and $50 billion for R&D). The goal is to save about 40% of US memory demand. As part of this strategy, on January 16, 2026, ground was broken for a large-scale memory building complex in New York, with a total construction cost of $100 billion and completion slated for 2030. It will represent the largest semiconductor facility in the United States upon completion.
Thus, analysts have rated MU stock as a “Strong Buy,” with an average price target that has already been exceeded. A high target price of $500 indicates a potential upside of about 25% from current levels. Of the 42 analysts covering the stock, 33 have a “strong-buy” rating, six have a “neutral-buy” rating, and three have a “hold” rating.
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As of the date of publication, Pathikrit Bose did not have any positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
