Micron may follow Nvidia and AMD with this move that could send its stock higher, Citi says

By Britney Nguyen

The memory-chip maker's DRAM chips are expected to be the next target for long-term AI-infrastructure contracts, Citi says, and higher prices should help the company's margins and stock

Citi analysts raised their price target for Micron's stock on Thursday.

Micron Technology Inc. has had one of the top-performing stocks in the S&P500 this year due to artificial-intelligence demand, and some analysts see it running even higher, as major technology firms could look to secure a long-term supply of memory chips.

The company (MU) is one of three major producers of dynamic random-access memory chips, which are used to temporarily store data on devices such as laptops and smartphones. In Citi Research's view, "DRAM will be the next chip to get long-term contracts with the AI food chain given its importance and undersupply." That means Micron could be on its way to a chip deal similar to the ones OpenAI has struck with Nvidia Corp. (NVDA), Advanced Micro Devices Inc. (AMD) and Broadcom Inc. (AVGO) in recent weeks, the analysts said in a Thursday note. South Korea's SK Hynix Inc. (KR:000660) and Samsung Electronics Co. (KR:005930) are market leaders in memory.

See more: Why Nvidia's $100 billion investment in OpenAI signals a major transformation

As AI companies look to secure DRAM supply amid projected supply tightness, the Citi team said Micron will likely benefit from "higher and sustainable" pricing for the chips, which should send its gross margins "back to the peak of 60%" in the third quarter of fiscal 2026, up from 44.7% in the fourth quarter of fiscal 2025. The analysts also model Micron's earnings power topping $23 in 2026, which is almost double the peak earnings per share of $12.26 it reached in 2018.

Micron is also growing into a major player in the market for high-bandwidth memory, which is in high demand from chip makers such as Nvidia for its next-generation chips for AI training and inferencing. HBM is made by stacking DRAM dies, and in a chip package, the memory chip sits next to a graphics processing unit, such as the ones made by Nvidia.

On Micron's earnings call last month, Chief Executive Sanjay Mehrotra said that DRAM supply is still tight due to accelerating AI-driven demand. He added that the company's HBM4 remains on track to support customer chip ramps - even as performance requirements have increased. The view of tight HBM supply has led to Wall Street projecting higher average sales prices and margins for Micron.

With expectations for Micron to ink long-term contracts, the Citi team raised its fiscal 2026 revenue guidance to $62.5 billion from $56 billion and lifted its earnings-per-share estimates to $21.05 from $16.93.

Citi maintained its buy rating on Micron's stock in the Thursday note and raised its price target to $240 from $200, reflecting 11 times its estimate for 2026 - "slightly above its historical average given a DRAM pricing upturn and better AI demand."

For fiscal 2027, the analysts raised estimates for sales to $65 billion, up from $52.5 billion, and for earnings to $20.31 per share, up from $15.93. Fiscal 2028 sales and EPS estimates were increased to $65 billion and $19.71, respectively, from $52.5 billion and $15.93.

Read: Why Broadcom's OpenAI deal may not be all it's cracked up to be

-Britney Nguyen

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10-16-25 0944ET