DA Davidson lifts Micron price target to $3000 on AI memory demand

DA Davidson lifted its price target on Micron (MU) to $3000 from $2100 on the memory-chip maker's growth prospects as AI drives demand for memory. The $3000 price target implies about 195% upside from Micron's shares, which were trading at $1018 before the bell on Wednesday. "Micron is on a growth trajectory for the next 3-5 years, which is what the market has not yet acknowledged," says DA Davidson analyst.

According to the brokerage, memory has become increasingly important to AI systems, as more memory can allow AI models to process larger amounts of information and run faster. It expects demand for memory to exceed supply in 2027 and 2028.

The brokerage values Micron at about 19 times its fiscal 2027 earnings estimate, as it reiterated its Buy rating on the stock.

Micron's use of longer-term supply agreements with customers should also make its business more predictable. "We would also point out that unlike previous cycles, demand is coming from the largest companies in the land like Amazon (AMZN), Microsoft (MSFT), Google (GOOGL), Nvidia (NVDA), and Apple (AAPL), not companies that tend to breach contracts," analyst said.

Chipmakers' usage of less memory per AI processor, a process known as "de-specing," should not necessarily weaken Micron's outlook, according to analyst. Davidson believes using less memory could reduce the performance of AI systems and eventually encourage customers to buy more memory.

Micron shares have risen 266% this year.

Create Your Free Account to Keep Reading

Get the confidence to navigate an uncertain market with free breaking news and stock alerts.