By Britney Nguyen
Memory is crucial to AI development, and one analyst sees customers securing supply with 'subscriptions'
Melius Research initiated coverage of Micron and Sandisk on Monday.
Memory chips have proven crucial to artificial-intelligence development - and one analyst sees demand getting so intense that suppliers end up following a software-like subscription model that would benefit players like Micron Technology and Sandisk.
Melius Research analyst Ben Reitzes believes the end is near for software makers, which &#34;are destined to lose seats and move to unpredictable consumption models,&#34; as customers become less willing to sign long-term agreements in favor of AI.
Chip-related companies, meanwhile, &#34;are getting promoted and becoming so valuable,&#34; he said in a Monday note, as he initiated coverage of Micron Technology (MU) and Sandisk (SNDK) with buy ratings on both stocks.
See more: The chip sector is on a historic tear, fueled by some unsuspecting stocks
Despite his bearish view of seat-based software-as-a-service subscriptions, Reitzes sees memory, optics and other critical AI-related suppliers &#34;becoming more worthy of 'subscriptions,'&#34; which would aim to secure a minimum revenue to reach a certain gross margin - therefore following what he called an &#34;'inverse SaaS' theme.&#34;
Reitzes envisions that AI-related subscriptions &#34;may not be as easy to understand as those known to SaaS,&#34; since details of long-term agreements and so-called strategic collaboration agreements are confidential. Even if memory companies end up hurt by hyperscalers in these agreements, he said &#34;the balance of power is shifting enough to make these agreements worthy of&#34; attention from investors.
On his conviction that memory customers will want to &#34;subscribe&#34; to multiyear commitments, Reitzes sees the possibility for Micron's and Sandisk's valuation multiples to double, or even triple.
He added that he &#34;wouldn't be surprised if&#34; he has to revise his multiple estimates higher as agentic AI and physical AI drive further demand for memory components.
Reitzes's two-year price target of $1,350 for Sandisk's stock represents about 27% upside from levels seen in recent Monday afternoon trading, when it was up more than 7%. Additionally, his two-year target of $700 for Micron shares, which were up about 5% Monday, implies about 34% further upside.
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-Britney Nguyen
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04-27-26 1505ET

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Don't just focus on computing power; the golden age of storage has arrived! Seagate (after market close, April 28), Western Digital, and SanDisk (after market close, April 30) all released their earnings reports. Faced with SanDisk's explosive business growth and a staggering 48% gross profit margin, will you follow the trend based on gut feeling, or use a "scientific yardstick" to measure the best odds?[Giveaway Topic] The Great Battle of Storage Giants' Earnings ReportsHow to Participate:1️⃣ Share Your Trades: Share your real-time trading operations and your entry logic.2️⃣ Opinion Sharing: Choose one of the three storage companies and comment on its earnings report or AI transformation strategy.🏆Exclusive Prize Pool:"Storage Power Prophet": 3 lucky users will receive a Changqiao custom pillow."Storage Power Pioneer Award": 10 HKD stock voucher for high-quality content."Interactive Lucky Draw Award": 288 task coins will be randomly awarded to active users.Tip: Share your winnings and strategy analysis for double your chances of winning!Deadline: May 1st, 24:00. Longbridge reserves the right to interpret these terms.

Storage giants are about to release their rankings: Who is the king of AI storage power?

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MULL

Melius Research initiated coverage of Micron and Sandisk, predicting significant growth due to a potential shift towards a subscription model for memory chips, crucial for AI development. Analyst Ben Reitzes believes this model could secure revenue and enhance valuations, with price targets of $1,350 for Sandisk (27% upside) and $700 for Micron (34% upside). He anticipates that demand from AI will drive these changes, despite challenges from traditional software agreements.

- Memory chips are essential for AI development, with analysts predicting a shift towards subscription models for suppliers like Micron and Sandisk.  
- Melius Research analyst Ben Reitzes believes that demand will lead suppliers to adopt these models to ensure minimum revenue, despite traditional software services facing challenges.  
- He projects significant valuation increases for both companies, with price targets of $1,350 for Sandisk and $700 for Micron, indicating substantial upside potential.

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Micron Tech

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Micron and Sandisk shares could soar further thanks to a software-like subscription model