Memory’s Second Wind: Micron’s Pricing Power Reshapes the AI Trade

The semiconductor trade is rotating. After months of GPU-led gains, the spotlight has shifted to the memory makers — and no name embodies that pivot more vividly than Micron Technology. The stock has surged more than 710% over the past twelve months, piling on a staggering 83.67% in the last thirty days alone. But behind the headline numbers lies a structural supply crunch that is rewriting contract terms and redrawing profit margins across the industry.

At the heart of the rally is a supply gap that hasn’t been this wide since 2011. According to TrendForce, the market is running a roughly 5% shortfall across DRAM, NAND, and HBM chips. For DRAM specifically, contract prices are leaping 63% in the current quarter alone, following an even steeper 90% jump in the prior period. Mizuho’s longer-term view is even more dramatic: it pegs the year-on-year contract price surge at 355% for DRAM and a breathtaking 510% for NAND. Such extreme moves have turned inventory allocation into a seller’s game, and Micron holds a full hand.

The numbers coming out of Boise confirm the thesis. In Micron’s fiscal second quarter of 2026, revenue hit $23.86 billion — nearly three times the year-ago figure. Gross margin ballooned to 74.4% from 36.8%, a level more typical of a software platform than a cyclical chipmaker. The company’s outlook for the third quarter calls for roughly $33.5 billion in revenue and earnings per share around $19.15, both well ahead of prior consensus estimates.

That earnings trajectory underpins an unusually wide valuation gap. On a trailing twelve-month basis, Micron trades at a price-to-earnings multiple of nearly 37, a level that looks historically stretched. But forward earnings tell a different story: the expected P/E sits around 12 to 13, less than half the semiconductor sector average of 24. Analysts are racing to reprice the story. D.A. Davidson’s Gil Luria maintains a Buy rating with a $1,000 target, implying roughly 25% upside from the latest close. Deutsche Bank matches that target, while Ross Gerber of Gerber Kawasaki goes further, setting a price objective of $1,140 based on projected EPS of $57 for fiscal 2026 — and more than $100 the following year.

Should investors sell immediately? Or is it worth buying Micron?

The bullish argument rests on a durable constraint. Micron’s executive Sumit Sadana has stated plainly that supply will fall short of foreseeable demand for years. The company is ramping capital expenditure to over $25 billion, building new fabs in Taiwan, Singapore, and the United States, but meaningful capacity won’t come online until fiscal 2028 at the earliest. In the meantime, Micron is accelerating production of its high-margin HBM4 memory, with mass production launched in the first quarter and a plan to scale quickly to 15,000 wafers per month. Reports that HBM capacity is fully booked through the end of 2026 reinforce the pricing leverage.

That pricing power is already showing up in customers’ budgets. Alphabet, Amazon, and Microsoft have raised their combined capital spending for the current year to a range between $185 billion and $200 billion. Meta has followed suit, with CEO Mark Zuckerberg explicitly citing soaring memory costs as a driver of the revised outlook. For Micron, that means a demand floor that is both deep and sticky.

Yet momentum carries its own risks. The 14-day relative strength index sits at 77.9, deep in overbought territory, and the stock’s distance from its 200-day moving average has widened to 158.64% — a measure of how fast the move has been. While institutional ownership remains high at 80.84%, the pace of accumulation has been uneven. HighPoint Advisor Group boosted its position by 69% in the fourth quarter of 2025, while Bailard trimmed its stake. Insider activity also signals caution: CEO Sanjay Mehrotra sold 40,000 shares in early May at an average price of $536.26.

Micron at a turning point? This analysis reveals what investors need to know now.

The next major catalyst will come when the hyperscaler cohort reports quarterly results this summer. Any sign of softening in their investment plans could puncture the narrative. For now, though, Micron sits at the center of a structural shift — from an era of GPU scarcity to one where memory has become the critical bottleneck in AI infrastructure. The second wave of the AI trade is just getting started.

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