May 26 : Shares of Micron Technology climbed about 14.2 per cent in early trading on Tuesday after brokerage UBS sharply raised its target price for the stock citing stronger AI demand and long-term supply deals, taking the chipmaker closer to $1 trillion in market value.
The revised target – the highest among the 46 brokerages covering the stock – implies a potential valuation of close to $1.8 trillion for the company by the next twelve months, compared with a market capitalization of $846.93 billion as of close on Friday.
• UBS raised the price target more than threefold to $1,625 from the earlier $535, compared with the stock’s Friday close of $751.
• The brokerage said the emergence of long-term agreements across the industry, locking in volumes and partially fixing prices could stabilize Micron’s historically volatile earnings profile.
• These deals are expected to cover a growing portion of DRAM supply, providing greater demand visibility and reducing pricing swings, according to the brokerage.
• There was “no reason” Micron should trade much differently from Nvidia on a price-to-earnings basis as long-term agreements and AI-driven demand reshape the company’s earnings and visibility, UBS said.
• The brokerage added that hyperscalers are increasingly willing to trade pricing flexibility for long-term supply assurance, a shift that underpins the contracts and helps stabilize the sector.
• As a result, UBS expects Micron to command a higher valuation multiple, moving closer to other semiconductor peers as investors gain confidence in its longer-term earnings durability.
• Micron was trading at 8.42 times expected earnings over the next 12 months, compared with 21.1 for the benchmark S&P 500 index and 24.66 for the Nasdaq 100.
