Micron stock soars over 8% today: could AI turn MU into next big chip winner?

Core Viewpoint - Micron's stock surged over 8% following a strong earnings report, indicating investor confidence in the company's potential as a key player in the semiconductor market, particularly driven by AI data-center demand tightening memory supply and increasing prices [1][2]. Financial Performance - Micron reported record fiscal Q1 2026 revenue of $13.64 billion, exceeding consensus by approximately $800 million and reflecting a 57% year-over-year increase [3]. - Earnings per share (EPS) reached $4.78, nearly $1 above estimates, with free cash flow hitting $3.9 billion, the highest in the company's history [3]. - For Q2, Micron forecasted revenue of $18.7 billion, $4.5 billion above Wall Street expectations, and EPS of $8.42, nearly doubling the consensus estimate of $4.49 [3]. Market Dynamics - The earnings report has led to a significant repricing of Micron's earnings trajectory for 2026, driven by memory scarcity [4]. - Conventional DRAM prices are expected to rise by 55-60% quarter-on-quarter in Q1 2026, while server DRAM prices are projected to increase over 60% in the same period [4]. - High-bandwidth memory (HBM) prices are anticipated to rise by 50-55%, with custom HBM for specialized AI chips increasing even more rapidly [5]. Analyst Sentiment - Analysts have adjusted their price targets for Micron, with Morgan Stanley raising its target to reflect the new guidance, indicating that Micron could benefit from the memory supply crunch for multiple years [6]. - Consensus price targets have increased by 30% in the two weeks following the earnings release, with some boutique firms projecting targets as high as $350 [6]. Demand and Supply Outlook - The demand for memory in AI infrastructure is growing faster than supply, with data center memory density per server increasing and HBM capacity sold out through much of 2026 [7][8]. - Manufacturers like Micron are being cautious with capital expenditures to avoid a cyclical downturn, which supports elevated memory prices as long as AI spending remains strong [8]. Future Projections - Institutional investors foresee a potential for Micron to double its net income in 2026 if pricing remains stable and utilization stays high [9].