Micron (MU) stock is leading a chip rally to open the trading week after receiving a bullish call from UBS Group, citing strong AI demand. MU shares are soaring as much as 17% higher after the opening bell rang in New York Tuesday. The stock is now up over 202% year-to-date, leading the way for AI stocks’ mass rebound in the last few months.
According to UBS analyst Timothy Arcuri, the AI boom has structurally changed the market for memory. Memory has historically been one of the semiconductor industry’s most cyclical businesses. Micron is the main source of computer memory manufacturing in the US. Demand behind it has gone sky high. Hence, Arcuri states that the market should start putting a more “normal” multiple on Micron as investors get more evidence of the changes AI has driven across the memory complex.
While DRAM and NAND have been part of a boom-or-bust market in computing over recent years, the AI boom is making these two components far more crucial. UBS argues that AI demand has changed that pattern by giving Micron more visibility into demand and a smoother earnings path. Therefore, MU stock could be one of the biggest gainers out of all the AI stocks in the sector, which led to UBS’ price revision. Indeed, UBS more than tripled its price target on Micron (MU) stock to a Wall Street-high of $1,625. The new target is up from $535 and implies roughly 115% upside from Micron stock’s Friday close of $751.
On the other hand, Micron DDR4 output is set to quadruple at the company’s Manassas, Virginia facility, and that has a fair number of investors asking whether the current DDR4 supply shortage is about to lose steam. On May 22, Micron commenced 1α DRAM production at the site, the first time its most advanced DDR4-compatible process has run on U.S. soil. Therefore, Micron is treading uncertain waters, yet UBS and other analysts remain bullish.