Micron Technology (MU) has already delivered the kind of stock-market run that normally makes Wall Street analysts more cautious.
D.A. Davidson isn’t backing away.
After attending Micron’s Technology and Product Leadership Webinar on Oct. 22, the firm maintained its Buy rating and $3,000 price target.
D.A. Davidson believes Micron’s leadership in memory technology gives it a wider competitive moat than the stock’s valuation currently reflects, Investing.com reported.
The conviction stands out because Micron fell about 6% on Oct. 22, when another artificial intelligence sell-off swept up semiconductor stocks. D.A. Davidson’s $3,000 target remains by far one of Wall Street’s most aggressive calls.
However, there is more to the debate than just Micron selling more memory chips.
Investors may ultimately value Micron differently, according to D.A. Davidson.
Memory manufacturers have historically been undervalued because huge shortage profits can disappear when new supply arrives. D.A. Davidson is betting that AI, longer customer commitments, and Micron’s technology can sustain growth.
If that occurs, Micron’s profits may be smaller than expected.
This could be the price investors are willing to pay for Micron’s shares.
Micron’s $3,000 target is really a valuation call
D.A. Davidson analyst Gil Luria originally raised his Micron target to $3,000 from $2,100 on Oct. 7.
The calculation used a roughly 19 times multiple on the firm’s fiscal 2027 earnings estimate, according to Investing.com.
That difference is important.
For another quarter or two, Luria isn’t only predicting increasing memory costs. He contends that as AI systems need more memory, investors are underestimating a growth runway that may last for three to five years.
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The Oct. 21 technology presentation reinforced that view.
According to Micron, as models become more complex, next-generation AI infrastructure will need a lot more memory bandwidth, capacity, and efficiency.
Scott DeBoer, chief technology and products officer, spoke on Micron’s plans for NAND storage, high-bandwidth memory (HBM), and dynamic random-access memory.
As AI computing needs rise, Micron is using new memory technology, advanced packaging, and customer collaboration to strengthen its position.
This clarifies D.A. Davidson’s recent reiteration.
The company does not treat Micron as a temporary shortage benefactor. It believes that technological leadership is expanding its moat, which may ultimately persuade investors to assign Micron an earnings multiple that is more in line with a wider market.
For a company that Wall Street has always considered quite cyclical, that would be a significant change.
Micron has evidence that the old cycle is changing
Micron’s recent financial results make the argument harder to dismiss.
Record $54.23 billion in fiscal fourth-quarter revenue rose from $11.32 billion a year earlier. Full-year revenue rose from $37.38 billion to $133.19 billion. In the fourth quarter, adjusted earnings were $33.42.
Micron expects fiscal first-quarter revenue of $61.5 billion, plus or minus $1.5 billion, and adjusted earnings of $38.15 per share, plus or minus $1.
One earnings report is not the only source of the strength. A growing number of Micron’s clients have also begun securing future supplies.
Reuters reported that between June and September, customer financial obligations under long-term supply agreements increased from $22 billion to $32 billion. Cash deposits constituted the majority of the pledges.
A measure of committed future business, Micron’s remaining performance commitments increased from $100 billion to almost $150 billion in the previous quarter.
These pledges are significant because they provide Micron with more visibility than memory makers had in the past.
Instead of only purchasing chips at current market pricing when they need them, customers concerned about shortages are booking capacity years in advance.
One of the main causes is the AI boom.
AI processors come with high-bandwidth memory that enables them to transfer massive volumes of data rapidly. The volume and performance of memory have a growing impact on the capabilities of AI models as they get bigger and carry out more complex tasks.
Micron has already secured agreements covering most of its 2027 HBM production, according to Reuters.
Micron COO Manish Bhatia even told Reuters that memory is now the main limitation in AI technology.
That scarcity is precisely what D.A. Davidson believes investors still underestimate.
Micron still has to escape an old Wall Street fear
Investors have typically been reluctant to assign memory businesses high values for a reason.
Higher pricing and enormous profits are encouraged by shortages. Manufacturers are motivated to increase capacity by such profits.
Prices eventually drop, supply then catches up to demand, and profits may drop almost as rapidly as they rose.
AI hasn’t broken that economic cycle.
Micron is making significant investments to boost output. According to Reuters, the business increased its intended U.S. investment to over $250 billion through 2035.
Although Bhatia said it would take many quarters for new plants to significantly enhance market supply, new wafer production is anticipated to start in mid-2027, Reuters reported.
For this reason, the following two years are crucial to the $3,000 premise.
Micron anticipates that in the fiscal years 2027 and 2028, memory supply and demand would become even more competitive. In a similar vein, Baird has contended that as industry supply growth slows, severe DRAM shortages may continue until 2027.
Industry DRAM bit-supply growth might drop to around 20% in 2027 after surpassing 30% in 2026, according to Investing.com, citing Baird, even if demand from AI infrastructure is still high.
The counterargument is simple.
Samsung Electronics and SK Hynix are also expanding advanced memory production. If capacity arrives faster than expected, AI spending slows, or customers become more efficient with memory, today’s extraordinary pricing environment could weaken.
That would be crucial, since Micron would need to generate significant profits to meet D.A. Davidson’s $3,000 objective.
Investors must think such profits are worth a much higher value.
That is a much more difficult obstacle.
According to Micron’s most recent data, demand isn’t the current issue. Customers have committed billions of dollars to future supply, its fourth-quarter revenue more than doubled year over year, and the majority of its 2027 HBM production has already been contracted.
It is unclear whether such circumstances indicate a separate structural phenomenon or just another very potent memory cycle.
The latter is what D.A. Davidson is wagering on.
Its decision to stick with a $3,000 target after Micron’s latest technology presentation suggests the firm increasingly sees the company’s competitive advantage, not just tight memory supply, as the reason earnings can remain elevated.
Ultimately, Micron must prove it can deliver on that promise.
Investors may someday cease seeing Micron as the boom-and-bust memory business it once was if AI has transformed memory into a more strategic and contract-driven component of computer infrastructure.
A $3,000 objective is far more difficult to defend if the previous cycle resumes.
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