Micron’s AI-Driven Surge: Memory Demand Outstrips Supply

The race to build artificial intelligence infrastructure is creating unprecedented demand for specialized memory chips, with Micron Technology emerging as a central beneficiary. The company's latest forecasts have surpassed even the most bullish Wall Street expectations, painting a picture of a market constrained by supply for years to come.

The focal point of Micron's stunning update is its outlook for the second fiscal quarter of 2026. The memory chipmaker now anticipates revenue of approximately $18.7 billion, a figure that dramatically exceeds prior analyst consensus estimates of $14.3 billion. This projection indicates exceptionally strong sequential growth, underscoring the breakneck pace of global AI data center expansion.

Perhaps more telling is the margin guidance. Management forecasts a non-GAAP gross margin of 68% for that period. A margin of this magnitude signals substantial pricing power, driven primarily by its high-bandwidth memory (HBM) business and other premium storage solutions, which are crucial for AI accelerators.

This optimism is built on a record-breaking first quarter performance:
* Revenue reached $13.64 billion, an increase of roughly 57% year-over-year.
* Earnings per share (EPS) came in at $4.78, decisively beating market expectations of about $3.96.
* HBM production capacity for calendar year 2026 is already effectively fully allocated to customers.

Concurrently, Micron has raised its total addressable market estimate for HBM through 2028 to $100 billion. Furthermore, the company now expects this market size to be achieved two years earlier than previously thought.

Supply Shortage Fuels a Structural Shift

The core driver of this dynamic is a persistent shortage of HBM chips, essential components for AI accelerators produced by industry leaders like NVIDIA and AMD. As the build-out of AI data centers accelerates worldwide, demand for these high-performance memory modules is surging earlier and more powerfully than anticipated.

In response, Micron is embarking on a massive capital expenditure program. For fiscal 2026, the company has outlined planned investments (Capex) of $20 billion. The objective is to scale production capacity to meet what it views as a sustained demand surge.

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

Wall Street Responds with Higher Targets

The robust financial results and aggressive forward guidance have triggered swift reassessments by market analysts. Several major firms have significantly raised their price targets to account for what they describe as a "sold-out" HBM supply pipeline through at least calendar year 2026.

Notable revisions include:
* Rosenblatt Securities, which set a Street-high price target of $500.
* Needham, raising its target to $300.
* Citigroup, establishing a new target of $330.

These adjustments reflect a growing consensus that Micron is not merely a participant in the AI boom but a provider of a critical bottleneck resource. The company has stated it has secured volume and pricing agreements for 2026, providing high visibility into revenue and earnings for the next 12 to 24 months.

Valuation and Execution in Focus

Despite a significant share price appreciation, many analysts continue to view the stock's valuation as moderate. Based on current earnings estimates, the shares trade at approximately 11.6 times expected profits—a historically low multiple for a company posting triple-digit growth rates in key segments and positioned squarely within a structural AI trend.

The market's optimistic take is already evident. Micron's stock posted a double-digit percentage gain last week, closing at a new 52-week high of €227.05 on Friday. Since the start of the year, the advance totals approximately 167%.

Attention now shifts to execution. The coming quarters will test Micron's ability to deliver on its ambitious capacity expansion plans while defending its elevated margins. Successful execution could permanently elevate the company's earnings base, cementing its gains from the ongoing AI memory supercycle.