HSBC Raises Micron Price Target as AI-Driven Memory Tightness Fuels Earnings Outlook

Core Viewpoint - HSBC raised its price target on Micron Technology to $500 from $350 while maintaining a Buy rating, driven by accelerating memory pricing and rising demand from AI inferencing platforms [1] Group 1: Stock Performance and Market Trends - Micron's shares have increased by 92% over the past three months, significantly outperforming the Nasdaq, which gained only 1%, primarily due to a faster-than-expected rally in DRAM prices [2] - The demand for NAND is identified as the next potential catalyst for Micron's stock, as inferencing platforms are increasingly consuming storage capacity [2] Group 2: Financial Forecasts - HSBC raised its fiscal second-quarter operating profit forecast by 6%, projecting an operating profit of $12 billion, which is an 88% increase quarter over quarter, on sales of $20 billion, a 47% sequential increase [3] - The firm expects blended DRAM average selling prices to rise by 45% quarter over quarter, up from a prior estimate of 37% [3] Group 3: Demand Drivers - Incremental demand growth for server DRAM and enterprise solid-state drives is noted, particularly for applications in token management, retrieval-augmented generation, and key-value caching, which are essential for AI inferencing [4] - Supply shortages and lean DRAM inventories of approximately two to four weeks are contributing to rising prices for PC and mobile DRAM [4] Group 4: Long-term Projections - HSBC anticipates that supply tightness will continue through year-end, leading to significantly stronger earnings growth in fiscal 2026, with an expected operating profit of $51 billion, a 368% year-over-year increase, on sales of $84 billion, up 124% [5] - The firm expects Micron to increase capital expenditures by 7% to expand DRAM capacity starting in the second half of fiscal 2027, along with higher dividend payouts, projecting a payout ratio of 6% [5]