The first phase of the AI boom was defined by GPU horsepower and raw compute. The next phase is being driven by agentic workflows, and it is quietly shifting the bottleneck inside data centers back to general-purpose CPUs and server memory.
While investors have spent two years obsessed with Nvidia and High Bandwidth Memory (HBM), the rise of autonomous AI agents is creating an unexpected squeeze in plain-vanilla DDR5 DRAM.
On Monday, Sept. 28, Baird analyst Tristan Gerra raised his price target on Micron Technology (MU) to $1,520 from $1,280. He kept an Outperform rating and argued that agentic AI will drive Micron to new heights, CNBC reported.
The new target implies about 40% upside from the Sept. 25 close. Baird lifted its target to $1,280 from $500 in June, so its number has roughly tripled in three months. Baird is right, and Micron’s own filings show why.
Micron is the only American company among the three firms that dominate DRAM, the working memory in phones, PCs and servers.
The $1.2 trillion company could overtake Nvidia as the top driver of S&P 500 profit growth, MarketWatch reported on Sept. 27. Index fund owners already hold this bet.
Agentic AI puts the humble CPU back in charge
Agentic AI is software that plans and completes multistep tasks, such as comparing flights or writing code. While GPUs handle raw parallel processing, these sequential steps require a general-purpose CPU to coordinate the work.
Because agents must hold working memory and track their state across long workflows, they create a continuous demand for high-capacity server DRAM (DDR5) wired directly to the CPU.
Next-generation AI servers are moving from one CPU per eight GPUs toward one per four or fewer, TrendForce found in May. Each extra CPU brings its own bank of server memory.
Gerra expects AI-related CPU demand to grow about 40% in 2027, TipRanks reported. On June 24, Micron said agentic AI pushes memory demand beyond accelerator racks into CPU and storage racks.
Ordinary server memory now rivals HBM on margins
Micron’s fiscal third-quarter results, released June 24, show where the money is going. Its core data center unit, which sells to server makers, posted $11.5 billion in revenue, up more than sevenfold from the prior year.
That unit earned an 87% gross margin. The cloud unit, home to Micron’s HBM business, came in at 83%. Per sales dollar, the plain-memory unit already out-earns the HBM unit. Gerra expects HBM margins to climb past 80% in 2027, adding a second profit engine.
Gerra sees DRAM contract prices rising 20% in the September quarter and 10% more in the December quarter. Server DDR5, the memory beside every new CPU, could climb another 15% to 20%.
Supply is tightening, too. Gerra expects DRAM supply growth to slow to about 20% in 2027 from more than 30% this year. He also sees Chinese rival CXMT’s output growth slowing sharply from about 45% in 2026. Less new supply plus more CPUs is a squeeze that keeps prices firm.
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Micron stock heads into earnings near its highs
Micron closed at $1,082.28 on Friday, Sept. 25, according to stockanalysis.com. By 8:20 a.m. EST Monday, Sept. 28, shares were down 1.3% premarket at $1,068.20 as investors took profits before earnings, TipRanks reported.
The 52-week range spans $154.65 to a record $1,255 set on June 25, an eightfold swing. Yet the stock trades at about 7.3 times expected earnings, a discount that signals doubt that these profits will last.
As of Sept. 25, 36 of the 49 analysts tracked by stockanalysis.com rated Micron a Strong Buy, nine said Buy and four said Hold. None recommended selling.
- The average 12-month target is $1,515, nearly identical to Baird’s. Targets span $361 to $2,200, a sign of deep disagreement.
- The top target in last week’s notes was $1,625, from UBS on Sept. 23. Wells Fargo cut its target to $1,400 from $1,525 the same day, citing valuation debates, Investing.com reported.
- Fiscal fourth-quarter results land Wednesday, Sept. 30, after the close. Analysts expect $51.19 billion in revenue, above the roughly $50 billion Micron guided to on June 24, TipRanks reported.
Memory is no longer the AI trade’s side bet
Micron’s own quarterly report warns that weaker HBM demand could shift supply into regular DRAM and drag prices down. Even Baird has an in-house skeptic.
Its investment strategist, Ross Mayfield, warned on CNBC in June that huge profits could push cloud giants toward alternatives.
Those risks look further out than 2027. SK Hynix CEO Kwak Noh-jung told Reuters on July 10 that 2027 will be the industry’s worst supply year ever. Intel CEO Lip-Bu Tan said on Feb. 3 that memory makers see no relief until 2028, Bloomberg reported.
The bigger shift is structural. Memory once boomed and busted with PC and phone sales. Agentic AI ties it to software that never clocks out, and buyers are responding with multi-year supply deals.
Wednesday’s guidance on gross margin and spending could drive the stock’s next move, BofA said, according to Barron’s. In the agent era, the chips that remember may matter as much as the chips that think.
Related: Bank of America doubles down on Micron stock before earnings