Micron is the NVIDIA of Memory: That’s Why it Set a New High

Key Points

• Micron is well-positioned to gain share and dominate in the HMB microchip industry.
• Competitor Samsung's chips aren't passing NVIDIA tests due to heat and power consumption.
• Analysts are raising targets and leading the market to a new high. 

Micron Technology’s NASDAQ: MU stock price is surging and will hit new highs this year. The reason is simple. It is the NVIDIA of memory chips. Where NVIDIA’s NASDAQ: NVDA differentiated chip designs have spawned a new industry, Micron is perfectly positioned to capitalize on it because of power consumption. AI is a power-hungry beast, so power-hungry it matches Bitcoin in scale, and Bitcoin is known to suck in some electricity.

AI heavily depends on memory, which Micron provides, and Micron’s high-bandwidth chips (loved by AI) use 30% less power than the competition while providing superior performance. In a world where every penny counts, that is a significant advantage and will increase market share and dominance. Then, there is also the embedding of AI into all the IoT and connected devices in the world, a semiconductor upgrade cycle that matches the one in data centers now. 

Samsung OTCMKTS: SSNLF and SK Hynix are the current leaders in high-bandwidth memory (HBM) and HBM3E (the latest version), but Micron is catching up fast and may soon overtake Samsung. Reuters reported that Samsung HBM3E chips have not passed NVIDIA’s tests due to heat and power consumption. Samsung says the chips must be optimized for each client. Still, they cannot match Micron’s performance. 

Micron Gets CHIPs Act Money

Micron has the US government's support, which is a tailwind for its business. That support is seen in the more than $6 billion in Federal grant money issued via the CHIPs Act. The money will help support Micron’s plan to spend $50 billion in targeted capital expenditure (CAPEX) over the next six years. It intends to build out its memory fabrication footprint, which is critical because Micron is the only US-based memory chip fabricator of HBM and HBM3 chips. The $6.1 billion will be used to build three fabrication facilities, one co-located with the current operations in Idaho and two in New York. The deal also includes a 25% Federal tax break for qualifying CAPEX compounded by local incentives. 

Analysts are responding well to Micron’s position and evolving outlook. The community has issued enough upgrades and price target revisions to land the stock on Marketbeat.com’s Most Upgraded and Top Rated Stocks list. The stock is #5 on the Most Upgraded list for the preceding 90 days, second only to NVIDIA regarding microchip stocks, and it is #43 on the Top Rated List, having a four-star rating and 3.0 ranking. The price target assumes fair value at current levels, near all-time highs, but is led higher by revisions. All the revisions dating back to March are above the consensus, with most being in the $140 to $150 range, well into the new all-time high territory. 

Takeaways from the chatter include signs of end-market normalization compounded by the outlook for AI. The latest update is Morgan Stanley, which upgraded to Equal Weight from Under Weight, lamenting a misplaced bearish outlook. In their view, Micron came to the HMB market late but is well-positioned to gain share while the market is ramping up. The firm raised its target by more than 30% to $130.

Micron is at an Inflection Point; Shares Could Hit $200

Micron is at an inflection point for the business and the stock price. End-market inventory normalization and AI have allowed the company to return to growth, with growth accelerating to 50% last quarter. The outlook for the current quarter is for another acceleration to over 75%, and it may be cautious, which is why the stock is on track to hit a new high. The recent action shows some resistance to higher prices but may not last long. The critical line is at $130.50, which may be crossed soon. In this scenario, the market could advance another $20 quickly, reaching $120 by mid-summer, and then add $30 to $55 to that price by the end of the year.