Why Micron's stock is Morgan Stanley's new top pick - even with its 180% rally this year

By Britney Nguyen

Pricing for DRAM is rising as shortages in the memory market continue, and Morgan Stanley sees that driving Micron's earnings power higher

Morgan Stanley raised its price target for Micron's stock to $325 on Wednesday.

Micron Technology's stock may already be one of the year's best performers in the S&P 500, with a 180% gain fueled by artificial-intelligence demand - but Morgan Stanley analysts just gave a strong endorsement of its future potential.

The Morgan Stanley team named Micron's stock (MU) a top pick on Thursday, on the expectation that the memory-chip maker will continue benefiting from industrywide shortages that can drive prices even higher.

Morgan Stanley's Joseph Moore wasn't always bullish on Micron's stock, missing most of its year-to-date rally as he only moved to an overweight rating in October. But since then he's seen encouraging signs, including a threefold increase in spot pricing for DDR5, a type of dynamic random-access memory.

He sees the company going into "uncharted territory from an earnings standpoint," and in his view, "the stock has yet to fully price in the upside that's coming."

See more: Micron's stock has doubled this year. Why Morgan Stanley is finally upgrading it.

Moore and his team see more room to run for Micron's stock, and they predict greater earnings power as well. He noted that "the gap between spot and contract pricing is hundreds of percent in some cases," and contract pricing could grow by two times in the next few quarters.

He sees the potential for earnings power north of $10 a share - more than double the Wall Street consensus for Micron in 2026. Against that backdrop, the stock price could reach close to $400. Morgan Stanley's bull case models Micron's stock reaching $420, Moore added; that's 71% above current levels, though Morgan Stanley's new base-case target of $325 is about 33% above today's prices.

Investors are likely holding back over worries that pricing strength won't hold in the long run, which is "usually the case in a typical DRAM cycle," Moore said. However, the current situation is due to "demand growth that's dramatically higher than supply" and "will be for some time," he said.

Read: The surprising stocks leading the tech sector this year thanks to an AI renaissance

The Morgan Stanley team noted earnings commentary from semiconductor capital-equipment suppliers and memory-chip makers indicating that DRAM capacity is being added "quickly, with entire fab schedules accelerated" - an unusual move "this shortly after an inflection in the market, unless there was material confidence that conditions would be tightening for more than a quarter or two."

Moore expects pricing to go up by 15% to 20% on a blended basis in the first and second quarters of next year. However, buyers who were late to lock in prices could see 50% or higher contract prices.

Meanwhile, Micron is a top player in the market for high-bandwidth memory, a specialized kind of DRAM, alongside South Korea's Samsung Electronics (KR:005930) and SK Hynix (KR:000660). However, Moore is less worried about Micron's revenue and market share for HBM.

"We think HBM competitiveness matters for the AI narrative underpinning the rationale for a higher multiple, but is more likely to hold back earnings in the near term as pricing is more stable," Moore wrote.

The Morgan Stanley team's base case depends on Micron's view from its latest earnings report that it is a leader in next-generation HBM4, has a stable share of the market and is sold out.

-Britney Nguyen

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11-13-25 1303ET