By Britney Nguyen
Micron's stock has dropped on competitive concerns, but a Deutsche Bank analyst thinks the company can benefit from a memory boom that's 'still not well understood' by many investors
A Deutsche Bank analyst raised her price target for Micron's stock to $500 on Tuesday.
This memory cycle &#34;is different than others,&#34; according to a Deutsche Bank analyst, and that could mean more big gains for Micron Technology's stock.
Deutsche Bank's Melissa Weathers said she expects supply of dynamic random-access memory to stay tight through 2027 into 2028 - especially as the artificial-intelligence boom fuels heightened demand for high-bandwidth memory.
HBM is made by stacking DRAM and is critical for advanced AI chips such as those designed by Nvidia (NVDA). Micron (MU) is one of the world's top producers of HBM, alongside South Korea's SK Hynix (KR:000660) and Samsung Electronics (KR:005930).
Compared with traditional DRAM, HBM is about three times more &#34;silicon-intensive,&#34; Weathers said in a Tuesday note, meaning it requires more of the wafer that chips are cut from. That intensity &#34;is causing a supply shock that we believe is still not well understood,&#34; she said. The supply tightness has allowed companies like Micron to raise prices for their products and to enter into long-term contracts with customers.
See more: Here's how Apple's stock can surge in the face of rising memory costs
Meanwhile, new DRAM fabs take at least two years to come online, Weathers said, while existing facilities are currently limited from expanding to relieve the demand crunch. Still, supply constraints could ease some next year as new capacity is added, she said.
Weathers sees these dynamics contributing to a &#34;more structurally profitable environment&#34; for Micron, and she raised her price target on the stock to $500, representing about 30% upside from its closing price on Monday.
Micron's stock was down about 1% on Tuesday afternoon, extending declines from Monday. Investors have become somewhat worried about reports saying that Micron's memory-chip rival, Samsung, is slated to start production of its next-generation HBM4 later this month for Nvidia to use in its upcoming Vera Rubin graphics processing units.
Don't miss: Micron's stock falls on fears about Nvidia's new chips, but investors may be overreacting
Weathers sees demand for DRAM bit, or each unit of data storage, growing at a compound annual growth rate of more than 15% through the end of the decade. Of that, bit demand for HBM is expected to grow at a more than 30% annual CAGR in the same time period, she said.
Her model &#34;reflects explosive growth in HBM bits by AI accelerator companies&#34; that need advanced memory to support larger, more complex AI models, she said. New AI models have longer context windows, meaning they need to be able to process more data at once.
In the near term, Weathers said she expects end customers to depend on their existing stock of memory components as they struggle to secure more. There's also the possibility of &#34;demand destruction&#34; going forward, she said, where rising DRAM prices boost the overall bill of materials to a point that is too expensive for end customers.
The company is scheduled to present at a Wolfe Research conference at 8:50 a.m. Eastern time on Wednesday.
-Britney Nguyen
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(END) Dow Jones Newswires
02-10-26 1343ET

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Deutsche Bank analyst Melissa Weathers raised Micron's stock price target to $500, citing a unique memory cycle driven by AI demand. She predicts tight supply of dynamic random-access memory (DRAM) through 2028, allowing Micron to increase prices and secure long-term contracts. Despite a recent stock decline, Weathers anticipates a 30% upside, with DRAM demand growing over 15% annually and high-bandwidth memory (HBM) demand exceeding 30%. Micron's upcoming presentation at a Wolfe Research conference is also noted.

- Deutsche Bank analyst Melissa Weathers raised Micron's stock price target to $500, citing an anticipated memory boom linked to AI demand.  
- The supply of dynamic random-access memory is expected to remain tight into 2028, enhancing pricing power for Micron amidst expected growth in high-bandwidth memory.  
- While new DRAM production faces delays, Weathers forecasts a 15% annual growth rate for DRAM demand and over 30% for high-bandwidth memory through the decade.

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Here's how Micron's stock can hit $500, according to Deutsche Bank