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Micron (NASDAQ:MU | MU Price Prediction) shares continue to be the talk of the town this year, with the memory chip juggernaut continuing to gain, even as the rest of tech plunges into a correction. Of course, things have become increasingly bumpy in recent months, and with Google’s TurboQuant breakthrough allowing AI models to get the job done with less memory (in the ballpark of six times less), questions linger as to what’s to happen with the memory chip supercycle.
Will six-times efficiency gains lead to just 16.6% the memory being consumed? Or will Jevons paradox kick in and demand for memory could move further off the charts, as demand looks to overwhelm supply into 2028 and maybe beyond that?
Could it be that we’ll be short on memory until the 2030s? It’s really hard to tell what the net effect on the market and Micron, America’s top play on the memory chip boom, will be when things have a chance to settle.
Micron stock is getting choppy, but that doesn’t mean they’re getting toppy.
Only one thing seems certain at a time like this: that Micron shares are going to stay incredibly volatile. But volatility works both ways, and with many sell-side analysts still incredibly bullish on the memory market and the fate of Micron, even after its incredible past-year surge, it might be premature to throw in the towel over the fear that the average AI model might start using memory more efficiently.
At this juncture, it just feels like AI demand is so explosive that firms will continue hoarding as much high-bandwidth memory (HBM) as they can get their hands on. It seems like cost is no real hurdle to firms readying for the next phase of the AI revolution. And with HBM sold out for the year, perhaps the timely efficiency gains might allow firms to actually get their orders in next year. Who knows? Maybe the consumer market might be able to have its fill at some point without having to spend money hand over fist.
In any case, the demand surge for AI memory isn’t linear. It’s tough to tell when the cycle’s peak will be and when that “bull whip” effect will kick in after supply looks set to overshoot demand.
We can’t be that far off from a peak in the memory supercycle, right?
Things might be different this time when you consider the transformative potential of AI and the structural shift dynamic we’re seeing across the market. The AI data centers are going up left, right, and center, and, with that, there’s going to be a huge need for energy, memory, cooling infrastructure, and all the sort.
Personally, I think there’s a great risk that analysts (and investors) will keep chasing the name on the way up. Though Micron and the rest of the memory chip scene took one to the chin when the Google TurboQuant news landed, I do think that it’s a stretch to think that we’re nearing the peak of the memory boom.
This Wall Street veteran is looking for Micron to hit $600
One analyst, KeyBanc’s John Vinh, thinks that shares of Micron have what it takes to make a move to $600 per share. And, no, that’s not a typo. The price target implies a gain of close to 58% from current levels. Vinh thinks the structure of its long-term agreements “mitigates” the downcycle risk.
I think he’s right to be so bullish, especially since the revenue will be in the books, regardless of what the next big move is for memory. The real bull case, in my view, lies in what happens to demand if AI agents suddenly start making big money such that the CapEx bar will be raised every year moving forward. It’s tough to tell, but the bulls, like Mr. Vinh, I think is ahead of the pack as others look to revisit the drawing board after Micron’s latest move.
