RBC Capital analyst Srini Pajjuri has maintained an ‘Outperform’ rating for Micron, alongside a price target of $1,500.
The firm believes that the demand for AI, especially from memory-heavy agentic AI applications, will continue to surpass the available memory supply.
According to RBC, factors like HBM growth, limited clean-room facilities, and tight availability of EUV resources are creating ongoing challenges for memory supply.
Micron Technology (MU) shares are currently valued in a way that RBC suggests doesn’t fully account for the company’s potential in the AI memory sector. This raises the possibility for substantial multiple expansion, as mentioned in a note to investors.
Pajjuri reiterated the ‘Outperform’ rating and $1,500 target, emphasizing the increasing memory needs stemming from AI workloads, particularly with the emergence of more demanding agentic AI applications.
Recently, MU stock saw a rise of about 1.6% during morning trading, although retail sentiment on Stocktwits has been leaning toward ‘bearish’ lately.
AI Demand Keeps Pressure On Memory Supply
RBC highlighted a persistent gap between memory demand and supply, underpinned by various structural issues in the industry. This includes rapid growth in high-bandwidth memory (HBM), insufficient clean-room capacity, and the limited availability of EUV equipment.
HBM has gained significance in AI accelerator technologies due to its ability to provide high memory bandwidth necessary for handling large AI tasks.
The rise of agentic AI, which entails AI that operates more autonomously and can manage multiple tasks, is expected to further increase memory requirements, according to the analyst.
Valuation Barely Credits Strategic Deals
Despite the favorable supply-demand dynamics, Pajjuri noted that Micron’s valuation appears rather modest.
The stock is trading at about 6.5 times anticipated forward earnings, attributing limited recognition to Micron’s Strategic Customer Agreements and floor pricing arrangements.
RBC concluded that the ongoing demand from AI, combined with supply constraints and customer agreements, positions Micron for a notable increase in its valuation multiple.
How Does The Rest Of Wall Street Feel About MU Stock?
MU stock has skyrocketed over 235% this year and more than 500% in the past year. The average 12-month price target for Micron on Wall Street is around $1,513, suggesting a potential upside of over 50% from current trading levels.
