Micron Technology(US:MU) Hua Er Jie Jian Wen·2026-02-11 12:25Core Viewpoint - Morgan Stanley believes the market has significantly underestimated the current shortage of memory chips, driven by the AI supercycle, making traditional cyclical valuation frameworks obsolete. Micron is at a sweet spot of both profitability and valuation expansion [1][2]. Group 1: Pricing Power and Profitability - The current tightness in the memory chip market is underestimated, with both DRAM and NAND prices expected to rise significantly in Q1 and Q2 of 2026. Micron's guidance suggests a 37% quarter-over-quarter revenue growth, with an implied average selling price (ASP) increase of about 30% [2]. - Competitors are also seeing substantial price increases, with SanDisk projecting a 60% ASP increase for NAND, while teams covering Samsung and Hynix predict DRAM price increases of 48% and 55% respectively [2]. - Morgan Stanley projects Micron's earnings per share (EPS) to reach $52.53 in the calendar year 2026, indicating a significant increase in profitability [7]. Group 2: Valuation Logic - The current market valuation of Micron is considered extremely low, with a price-to-earnings (P/E) ratio of only 8 times the projected earnings of $48. This is significantly below the peak profitability levels seen in previous cycles [8]. - Morgan Stanley has revised its cross-cycle EPS estimate from $14 to $18, which, when multiplied by a 25x P/E ratio, leads to a new target price of $450 for Micron [9]. Group 3: Supply and Demand Dynamics - The AI-driven structural supply-demand imbalance is a key factor supporting this supercycle, with manufacturers' inventories at historically low levels. Even with premium pricing, customers struggle to secure sufficient supply [10]. - Demand is expected to surge, with Nvidia projecting an additional $30 billion in quarterly revenue by 2026, and the entire storage industry facing nearly $200 billion in annualized incremental revenue needs over the next 12 months [10]. Group 4: Market Concerns Addressed - Concerns regarding the impact of Chinese memory chip companies and HBM4 production issues are deemed exaggerated by Morgan Stanley. Micron is on track to begin HBM4 mass production in Q2 2026, and any potential challenges in ramping up HBM4 production will not negatively impact profitability due to the continued dominance of HBM3e in the market [11].