Micron's AI Memory Engine: HBM4 Ships for Nvidia as Record Q2 Earnings Validate a $1,625 UBS Target

Micron begins high-volume HBM4 shipments for Nvidia, locks in first 5-year agreement. UBS raises target to $1,625 on structural shift with multi-year contracts and tight HBM supply.

Micron Technology has started shipping its next-generation HBM4 memory chips in high volumes for Nvidia applications, CEO Sanjay Mehrotra confirmed, as the company locks in the first strategic five-year customer agreement. The milestone marks a seismic shift for a memory maker long dismissed as a cyclical commodity play, and it comes just as a UBS analyst slapped a $1,625 price target on the stock — the highest on Wall Street.

The rally kicked into overdrive after Micron reported a fourth straight record quarter. Revenue for the period ended February 2026 hit $23.86 billion, nearly tripling from $8.05 billion a year earlier. Adjusted earnings per share came in at $12.20, while net income surged from $1.58 billion to $13.79 billion. Gross margins more than doubled, climbing from 37% to 74%, powered by higher average selling prices and falling manufacturing costs.

For the current quarter, management guided for roughly $33.5 billion in revenue and adjusted EPS of around $19.15. That kind of trajectory has analysts racing to update their models.

UBS analyst Timothy Arcuri raised his price target from $535 to $1,625, implying upside of roughly 116% from the stock's prior close. The bank's thesis rests on a structural change in how Micron does business: long-term supply agreements now cover 60% to 70% of its server DDR5 shipments, with durations of three to five years and fixed volumes, sometimes at fixed prices. That insulation from the spot market allows UBS to forecast earnings per share above $100 annually from 2027 through at least 2029, with cumulative free cash flow exceeding $400 billion over that window.

Arcuri's model now values Micron at 15 times earnings — a multiple that would have seemed absurd for a DRAM pure-play just a few years ago. But the bank argues that the combination of multi-year contracts and a structural shortage in high-bandwidth memory (HBM) turns the company into a more predictable growth story. HBM capacity for 2026 is already sold out, and DRAM supply is expected to remain tight through mid-2028.

The market response was immediate. Micron shares rose more than 16% on Tuesday, touching an all-time high of $872 and briefly pushing the company's market capitalization above $1 trillion — a level that would have made it the 11th-largest US-listed firm, just behind Eli Lilly and ahead of Walmart. In European trading, the stock climbed 16.13% to €783.40, and over the past week it has gained 30.59%.

Other analysts quickly followed UBS's lead. CFRA lifted its 12-month target to $900, citing stronger earnings and cash flow from AI demand and customer prepayments. Citigroup raised its target from $425 to $840, pointing to aggressive DRAM price increases and an extended upcycle. HSBC and Melius Research both set targets at $1,100, with Melius describing Micron as a "bottleneck player" in the AI ecosystem that could eventually capture market capitalization from traditional software firms and parts of the Magnificent Seven.

On the production front, Micron is moving ahead with a $200 billion US investment plan. At its Manassas, Virginia facility, the company has started manufacturing 1-alpha DRAM, which boosts memory density by 40% over earlier generations. The chips target automotive, defense and industrial applications — sectors where local computing power and supply-chain resilience matter most. Full qualification is expected by the end of 2026, after which the company plans to quadruple DDR4 wafer capacity at the site.

The enthusiasm is not confined to Micron. SanDisk, Western Digital and Seagate all gained between 2.8% and 9%, and the Philadelphia Semiconductor Index hit a fresh record, buoyed by Nvidia's quarterly revenue of $81.6 billion. Political tailwinds also helped: President Trump praised Micron over the weekend for its "hundreds of billions" of dollars in US investment, and broader market optimism around US-Iran peace talks lifted risk appetite.

Still, the valuation debate is sharpening. At 35.46 times trailing earnings, the stock trades well above its five-year median multiple of 20.72. Over the past three months, insiders have sold $54 million worth of shares, with no purchases reported. Critics caution that once supply catches up with demand, the scarcity premium could evaporate — and savvy investors may sell before the shortage fully ends. For now, though, the UBS upgrade has provided Micron with its most powerful single-day catalyst of 2026, and the market is betting that the memory maker has turned the corner for good.