Micron’s Take-or-Pay Contracts and HBM Sellout Provide a Foundation — But the Market Is Focused on the Cracks

Record Q3 revenue and profits at Micron fail to lift stock as AI spending narrative shifts; analysts maintain strong buy ratings despite 13% weekly drop.

Micron Technology has wrapped up its fiscal third quarter with a set of numbers that would typically trigger a celebration: $41.46 billion in revenue, net income of $28.24 billion, operating cash flow of $25.39 billion, and free cash flow of $18 billion. The company has also locked in roughly $22 billion in take-or-pay commitments across 16 long-term agreements, and its entire high-bandwidth memory (HBM) capacity is spoken for through the end of 2026. Yet the stock closed Friday at €746.30, down nearly 13% on the week and 32.39% below its 52-week high of €1,103.80 — a high reached only at the end of June.

The disconnect stems from a market that has suddenly turned skeptical on the AI spending narrative. Earlier in July, shares surged 13% after-hours on the quarterly release, briefly touching $1,180. That momentum evaporated when the Chinese AI startup Moonshot unveiled Kimi K3, an open-source model with 2.8 trillion parameters, on the same Friday. The announcement raised questions about whether the enormous capital expenditures by U.S. hyperscalers are still justified, sending the Philadelphia Semiconductor Index into bear-market territory — down roughly 20% from its June 22 record and off more than 18% in July alone. Broader indices also slipped, with the Dow, S&P 500, and Nasdaq falling between 0.77% and 1.40% that day.

Analysts, however, remain largely constructive. A panel of 45 institutions has issued predominantly Strong Buy ratings, with a consensus price target of $1,486. TD Cowen set a target of $1,500, pointing to sustained CPU strength through late 2026 and DRAM supply constraints. KeyCorp reiterated its Overweight rating with a $1,750 target. At a price-to-earnings ratio below seven, Micron ranked among the cheapest stocks in the Nasdaq 100 in July — a stark contrast to the month’s double-digit percentage losses. For the current fiscal year, consensus estimates put earnings per share at $72.75 on revenue of $129.6 billion. The company’s own guidance for its fourth quarter calls for roughly $50 billion in revenue, a gross margin of about 86%, and adjusted EPS of $31.00.

Meanwhile, Micron is pressing ahead with structural moves that should insulate it from near-term volatility. The chipmaker has signed multi-year Strategic Customer Agreements with tier-one auto suppliers including Qualcomm, HARMAN, Visteon, DENSO, and Hyundai Mobis, securing more predictable pricing as the industry pivots to AI-enabled vehicles. In the U.S., Micron increased its planned investment to more than $250 billion by 2035 and poured the first concrete at its new megafab in Clay, New York — more than a quarter ahead of schedule. HBM4 shipments for Nvidia’s Vera-Rubin platform began in March and are reportedly ramping at twice the speed of the previous HBM3E generation.

Yet challenges are building on multiple fronts. ChangXin Memory Technologies (CXMT) has set its IPO price at 8.66 yuan per share, aiming to raise approximately $8.55 billion in what would be Asia’s largest listing this year. Trading on Shanghai’s STAR Market is set for July 27, and if CXMT expands capacity as planned, pricing pressure in the DRAM market could intensify. Additionally, investment firms linked to the Templeton name have warned that the current AI memory boom may be cyclical rather than structural, pointing to 2018 when Micron traded at a P/E of 4.5 before the stock collapsed 57%.

Institutional positioning has been mixed. Hanseatic Management Services and GS Investments built new stakes in the first quarter, while German American Bancorp and Vision Retirement adjusted their holdings. Appaloosa Management, run by David Tepper, reportedly tripled its Micron position to 1.5 million shares in the fourth quarter of 2025. The company has hedged about 40% of its revenue through long-term contracts with price floors — a buffer that will be tested as the industry navigates this sudden re-rating. With Google, IBM, Tesla, and Intel all reporting in the coming week, the next clues on AI spending and memory demand will arrive quickly.