Micron’s Two-Front Memory Strategy Fuels Structural Scarcity as UBS Sees $1,625 Target

Micron faces insatiable demand for HBM and DRAM yet can't boost supply until 2028; UBS triples price target to $1,625 on extended pricing power.

Micron Technology is caught in a paradox that defines its current moment: it cannot keep up with demand for its most advanced products, yet is pouring $200 billion into new US factories that won’t meaningfully boost industry supply until 2028. The result is a pricing environment so favorable that UBS has tripled its price target on the stock in a single move — from $535 to $1,625.

The chipmaker’s latest quarterly results underscore the tension. In its second fiscal quarter of 2026, revenue hit $23.86 billion — well above internal forecasts — and the cloud-memory segment alone contributed $5.28 billion at a 66% gross margin. Adjusted earnings per share came in at $12.20, while management guided for third-quarter non-GAAP EPS of $19.15 on revenue of $33.5 billion and a gross margin near 81%.

A structural deficit, not a cyclical peak

CEO Sanjay Mehrotra describes the current landscape as “structural scarcity.” Micron can fulfill only 50% to 67% of customer demand for its highest-demand HBM and DRAM products. That supply constraint is the bedrock of UBS’s aggressive new valuation model. The bank now forecasts that DRAM will remain undersupplied until at least the second quarter of 2028 — three quarters longer than previously assumed. NAND tightness is now expected to last through the fourth quarter of 2027.

The implications for pricing are dramatic. UBS now expects High Bandwidth Memory prices to rise 50% per gigabyte year-over-year, up from an earlier estimate of 35%. That shift, combined with the extended supply deficit, has forced a complete overhaul of the bank’s earnings model. For calendar 2027, UBS sees Micron earning $155 a share, up from $133; 2028 rises to $167 from $122; and 2029 climbs to $117 from $77. Over the full period through 2029, the bank projects cumulative free cash flow of more than $400 billion.

A bet on yesterday’s technology for tomorrow’s supply chains

While Wall Street fixates on HBM and cutting-edge DRAM, Micron is simultaneously scaling up a very different kind of production. At its facility in Manassas, Virginia, the company is quadrupling wafer capacity for 1-alpha DRAM — a node that produces DDR4 memory. That may seem like a step backward, but it is a calculated response to demand from defense, automotive, and aerospace customers that require long product lifecycles, traceable supply chains, and domestic sourcing. Full qualified series production at the site is expected by the end of 2026.

The broader US expansion is staggering. Megafab projects in Idaho and New York are part of a plan to quadruple Micron’s domestic manufacturing capacity within a decade, backed by $200 billion in total investment. The first Idaho fab is slated to produce its initial wafers by mid-2027. Beyond that, Micron is preparing to launch HBM4E in 2027 and is accelerating the adoption of EUV lithography.

Pricing power until 2028

Management sees no significant new industry supply arriving before 2028, which gives Micron considerable pricing leverage for the next two years. That view aligns with UBS’s extended tightness timeline and its reassessment of the company as a structural beneficiary of AI server buildout rather than a cyclical memory trade.

Mizuho added its own endorsement on May 19, raising its price target to $800 on the back of stronger NAND and DRAM pricing expectations and growing AI-driven demand.

Shares currently trade at around €685 in Europe and $751 in the US, giving Micron a market capitalization of roughly $850 billion. Despite that lofty valuation, the forward price-to-earnings multiple sits at about 8 — a reflection of how rapidly analysts are raising their earnings estimates.

The central question for investors is whether the supply deficit at DRAM and NAND really persists until 2028. Micron’s next quarterly report will test whether gross margins hold near guidance levels and whether management’s HBM pricing outlook matches UBS’s new model. Until then, the stock is a bet on scarcity — both structural and self-reinforcing.