Micron’s Multi-Year Supply Pacts and HBM4 Backlog Push Market Cap Past $1 Trillion

Barclays and UBS raise price targets as Micron transitions to fixed-volume deals, faces supply crunch, and sees revenue tripling on AI memory demand.

The memory-chip maker’s business model is undergoing a tectonic shift. Barclays analyst Tom O’Malley argues that Micron is abandoning the one-year, quarterly-price contracts that have long made its earnings a rollercoaster. The first so-called Strategic Customer Agreement — a five-year deal with fixed volumes — signals a new era. “Storage and memory are the most attractive subsector below accelerator chips in the entire semiconductor space,” O’Malley wrote, lifting his price target from $675 to $1,175 while maintaining an overweight rating.

That structural stability is reinforced by a severe supply crunch. CEO Sanjay Mehrotra has admitted that Micron can only satisfy between 50% and 65% of medium-term demand for high-bandwidth memory. All production capacity for HBM4, the latest generation, is sold out through the end of fiscal 2026. The imbalance between supply and demand, O’Malley believes, will persist until at least 2027, fuelling further price increases for DRAM and NAND.

The market has rewarded this new reality. Last Tuesday, Micron’s market capitalisation crossed the $1 trillion threshold for the first time, making it the tenth most valuable publicly listed company in the United States — overtaking Walmart and Eli Lilly. The stock surged nearly 20% in a single session and now trades at a 52-week high, roughly 75% above its 50-day moving average. Shares have climbed around 197% year-to-date, while UBS analysts reported a 192% gain.

UBS analyst Timothy Arcuri was even more aggressive, tripling his target from $535 to $1,625 — the highest among 46 analysts covering the stock, according to Reuters. Arcuri projects Micron will generate earnings per share of more than $100 through at least 2029 and cumulative free cash flow of up to $400 billion over the next three years. He contends that the market no longer treats Micron as a cyclical memory commodity play but as a structural pillar of AI infrastructure.

The fundamentals back up the optimism. In the second fiscal quarter ended in February, Micron reported revenue of $23.86 billion — more than double the year-ago period and nearly triple the $8.05 billion recorded in the same quarter last year. Non-GAAP net income hit $14.02 billion, or $12.20 per diluted share. Operating cash flow for the first half of the fiscal year reached $20.31 billion.

Management’s guidance for the current quarter is even more striking. It expects third-quarter revenue of $33.5 billion — a figure that would exceed Micron’s entire annual revenue for any year up to and including fiscal 2024. Gross margin is forecast to land at around 81%, underscoring the pricing power the company enjoys in the current market environment.

To close the supply gap, Micron is investing more than $25 billion in capital expenditure this fiscal year. New fabrication plants are being built in Virginia, Idaho and New York, partly funded by the CHIPS Act, alongside modernised facilities in Singapore and Japan. The catch: additional capacity will not come online until the second half of 2028 at the earliest, meaning the constraints will last for several more years.

Barclays’ O’Malley sees the recent five-year customer agreement as only the beginning. The key catalyst in coming quarters will be how many more Strategic Customer Agreements Micron signs and what details emerge about volumes, pricing mechanisms and potential upfront payments. Only then, he argues, can investors fully judge whether the transformation from a volatile cyclist to a contract-backed AI supplier is truly sustainable. For now, the market is betting it is.