Micron's Dip Masks a Deeper AI-Driven Supply Squeeze as Analysts See $1,000 Potential

Despite an 8% sell-off, Micron's HBM chips are sold out through 2026, with record revenue and strong pricing power driving analyst targets above $950.

The blistering rally in Micron Technology shares hit a speed bump this week, but the fundamental story underpinning the memory-chip maker remains as tight as ever. After scaling a fresh yearly high of €676 on Monday, the stock reversed sharply, shedding more than 8% in U.S. trading to around $730. The trigger: a South Korean government official floated the idea of a special levy on profits from artificial intelligence hardware, sparking a sell-off across Asian semiconductor names. The move was amplified by technical signals—the Relative Strength Index had touched an extreme 85, flagging a market ripe for profit-taking. Elevated U.S. inflation data added further pressure.

Yet beneath the short-term noise, the demand-supply equation for Micron's products is arguably stronger than at any point in its history. The company's high-bandwidth memory (HBM) chips, critical for AI accelerators, are completely sold out through 2026. Analysts at BofA Securities captured the shift by nearly doubling their price target on the stock to $950, assigning $710 of that to the legacy memory business and $240 to the AI-specific segment. For 2027, capacity is also largely pre-booked, meaning pricing power is likely to persist for quarters to come.

Micron is not resting on its order books. The company is currently testing next-generation memory modules built on its proprietary 1-gamma technology. These new components run over 40% faster than the current generation while cutting power consumption by more than a quarter—addressing a critical pain point in hyperscale data centers. The timing dovetails with a surge in capital outlays: management plans to invest over $25 billion in the current fiscal year to boost production capacity.

The financial results already reflect the windfall. In the fiscal second quarter, revenue hit a record $24 billion, with gross margins soaring to 74%. Net income came in at nearly $14 billion. For the third quarter of fiscal 2026, guidance calls for revenue of roughly $33.5 billion and gross margins of 81%, driven by premium pricing on AI hardware. Over the past month, the dividend was raised 25% to signal confidence in cash flows.

Analysts from D.A. Davidson and Deutsche Bank have set targets of $1,000 each, pointing to the structural transformation of the memory industry. Even at current elevated levels, the forward price-to-earnings ratio stands at just 7.6, underscoring Micron's earnings leverage. The stock has gained roughly 142% since January, and although the RSI has cooled from its extreme to around 78—still technically overbought—the long-term trajectory remains supported by the fact that both HBM and NAND storage have zero spare capacity.

Adding a wild card to the supply picture, tens of thousands of workers at rival Samsung Electronics are set to strike for nearly three weeks starting at the end of May. A prolonged production halt at the South Korean giant would further tighten the market and bolster Micron's pricing hand. The very tax talk that rattled shares this week is a backhanded acknowledgment of the massive profits flowing into the AI memory ecosystem. For now, the company's biggest challenge is not demand—it is finding enough wafers to keep up.