Several Wall Street banks believe that the long-term demand for memory chips, particularly in the context of artificial intelligence (AI), is being underestimated by the markets.
Micron Technology, a major chipmaker, is projected to see its shares rise by over 30% from current levels, with DA Davidson maintaining a price target of $1,000 for the stock, citing increased confidence in its buy rating. On Monday, Micron's stock rose nearly 8%, surpassing $800.
Analyst Gil Luria from DA Davidson highlighted a 'virtuous cycle' in memory chip demand driven by large language models (LLMs), which require more memory as they grow larger and more complex. This increased demand for memory chips, particularly in the 'key value cache' segment, is expected to exceed current market expectations.
Deutsche Bank also set a $1,000 price target for Micron, noting favorable cyclical dynamics in the sector and a strong fundamental backdrop that could lead to a higher share valuation. Luria pointed out that DRAM chips are becoming the critical pressure point in the AI buildout, as their supply is limited to a few manufacturers, including Micron, Samsung, and SK Hynix.
Mizuho recently echoed this sentiment, predicting significant price increases for DRAM and NAND memory due to strong AI demand and tight supply. However, not all analysts are optimistic; Bernstein's Stacy Rasgon assigned Micron an outperform rating with a lower price target of $510, suggesting a potential decline from current prices.
Meanwhile, Barclays reported that data center capacity is expected to double between 2025 and 2030, driven by AI demand, with analysts predicting low vacancy rates and steady rent growth in the sector. They anticipate that the majority of new data center capacity will be absorbed quickly, indicating a robust market for enterprise AI solutions