BofA downplays China’s threat to Micron’s AI business

Micron Technology (MU) shares dropped in late July when a Chinese rival’s stock market debut instantly minted one of the country’s most valuable companies.

Investors read it as a warning sign for the world’s AI memory leaders. Bank of America read the same headlines and reached the opposite conclusion.

On August 3, BofA analyst Vivek Arya reiterated his Buy rating on Micron and held his price objective at $1,550, implying steep upside from current levels, according to a BofA Research note. Shares climbed as much as 8.3% that day.

That anxiety is understandable on the surface. CXMT, formally ChangXin Memory Technologies, held just 8% of the global DRAM market as of the second quarter, compared with Micron’s 22%, according to Counterpoint Research data cited by CNBC. But the company is scaling capacity at a pace few Western chipmakers have managed.

Related: Bank of America doubles down on Micron stock price for 2026

Some analysts expect CXMT’s wafer output to reach roughly 350,000 units a month by the end of 2026, closing in on Micron’s own capacity of about 385,000, according to semiconductor research firm SemiAnalysis. On paper, that looks like an existential threat to Micron’s pricing power.

BofA disagrees, and its reasoning is the real story here. The bank’s note argues CXMT’s growth is concentrated almost entirely in commodity DRAM, the basic memory used in phones and laptops, not the high-bandwidth memory that powers AI servers.

That distinction, more than any capacity number, determines whether China’s rise actually threatens Micron’s most profitable business.

The AI memory gap is bigger than the capacity gap

CXMT still lacks access to extreme ultraviolet lithography machines, the equipment required to manufacture advanced memory efficiently.

Export controls have kept those tools out of China, forcing CXMT to use roughly 30% more wafers than Micron or Samsung to produce the same volume of chips, according to CNBC.

The company is not expected to ship its first HBM3 chips until later this year, putting it roughly four years behind SK Hynix in the memory AI accelerators actually need, according to The Motley Fool. For Micron, Samsung and SK Hynix, that gap functions as a moat.

The real investment story in memory has shifted to HBM, where technical barriers remain steep and the three incumbents still dominate, Forbes noted in a recent analysis of the competitive landscape.

CXMT’s rise matters for the low-margin commodity chips inside a smartphone. It matters far less for the memory sitting next to Nvidia’s most advanced GPUs.

The end of boom-and-bust?

BofA’s note also points to a structural shift away from the spot pricing that made memory notoriously volatile.

Roughly 50 to 70% of Micron’s future capacity is expected to be covered by long-term agreements running three to five years, the bank estimates. Samsung is moving in the same direction.

Those contracts do not guarantee prices hold in a severe downturn. But they give Micron and its customers more visibility into supply and demand, which BofA believes will smooth out the boom-bust cycles that have defined memory investing for decades.

Even BofA’s bear case makes the point. The bank models potential earnings per share near $100 in a severe downturn scenario for 2028, a level still roughly nine times above Micron’s prior cyclical peak of about $12 in 2018.

More Micron:

AI demand sustains high prices

Micron’s own results support the demand side of that argument. Fiscal third-quarter revenue reached $41.46 billion, up from $9.30 billion a year earlier, according to the company’s earnings release. Chief Executive Sanjay Mehrotra said the results “reflect the strategic value of memory in the AI era.”

BofA’s own data reinforces that point. An index of GPU rental prices the bank tracks shows rates for Nvidia’s H100 and H200 chips holding near record highs through early August, evidence that customers still see strong returns on AI compute.

Demand for the memory packaged inside those GPUs is unlikely to soften while rental prices stay elevated.

Pricing data points the same direction. BofA’s note cites TrendForce estimates showing server DRAM prices climbing as much as 18% quarter over quarter heading into the third quarter. That is not the pattern of a market bracing for a Chinese-led price war.

The bigger lesson extends beyond one earnings note. Investors have spent two decades bracing for Chinese manufacturers to repeat the pattern that reshaped solar panels and steel, flooding a market and collapsing prices for everyone.

CXMT may eventually get there in commodity DRAM.

But the frontier of the memory industry has moved to HBM, a market defined less by wafer counts than by who can access the equipment to manufacture at the smallest nodes. Until that changes, the loudest headlines about China’s memory ambitions may say more about market psychology than about where Micron actually makes its money.

Related: Micron’s CEO sold big last week. Was it a warning sign?

This story was originally published by TheStreet on Aug 6, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.