Micron’s Rally Hits an Air Pocket as Supply Constraints Fuel Both a Profit Boom and a Technical Overbought Signal

Profit-taking after overbought RSI of 77 cuts Micron 8% from all-time high, but Q2 revenue tripled and HBM is sold out through 2026. Long-term AI demand supports growth.

The euphoria that drove Micron Technology to a new all-time high earlier this week evaporated on Friday as profit-taking sliced more than 8% off the stock in Frankfurt, dragging it to €624. The pullback came just hours after Bank of America nearly doubled its price target on the memory chip specialist to $950, citing an explosion in demand from AI data centres.

Yet the selling is not a story of fading fundamentals. Micron’s second fiscal quarter revenue tripled to $23.86 billion, while earnings per share surged 756% year-over-year to $12.07. The company’s board also announced a 30% increase in the quarterly dividend, a clear sign of confidence in the strengthening cash flow.

The real driver behind the volatility is a market that has run far ahead of itself in too short a time. The Relative Strength Index hit 77 before Friday’s slide, a classic overbought reading. Even after the drop, the stock remains up roughly 132% since the start of the year and trades just 7.4% below its nearby highs.

Trading action flips the script on Nvidia

Micron’s ascent has been so powerful that it briefly replaced Nvidia as the most traded stock on Wall Street. In the past nine trading sessions, Micron’s daily volume exceeded Nvidia’s on six occasions. Over a rolling five-day period, some $47 billion worth of Micron shares changed hands, compared with about $34 billion for the GPU giant.

The market is now pricing in a structural shift: high-bandwidth memory (HBM) has become the bottleneck for AI infrastructure. Micron’s HBM production is sold out through 2026, and management has already locked in both pricing and delivery volumes for the current year. The importance of memory prices is reflected in earnings calls, where mentions of “memory pricing” have surpassed 550 this year — the highest count since 1999.

Outlook keeps the long-term narrative intact

Looking ahead, guidance points to further acceleration. For the third quarter, Micron expects EPS of $18.90 on revenue of $33.5 billion. That would represent a dramatic ramp even from the stellar second quarter. Analysts at Bank of America estimate the total addressable AI data-centre market could reach $1.7 trillion by the end of the decade, with Micron’s specialised memory chips seen as indispensable to every AI accelerator.

Still, the cyclical nature of the memory business remains a cautionary tale. Micron is investing heavily in new US capacity across Idaho, New York and Virginia, but the first DRAM production from its Idaho facility will not begin until mid-2027. That means supply will remain tight for the near term, supporting pricing power and margins. But when new capacity eventually comes online, the dynamics could flip. SK Group chairman Chey Tae-won has warned that the wafer shortage could persist until 2030, underscoring the industry’s razor-thin balance between scarcity and glut.

Technically, Friday’s pullback looks like a healthy digestion of recent gains. The stock still sits nearly 50% above its 50-day moving average of €414.80, giving it a comfortable buffer. For now, the next major test will be the end of the current quarter, when the market checks whether the price strength can sustain the lofty expectations baked into the stock.