This Nvidia change could spell good news for Micron

By Britney Nguyen

An analyst says that Nvidia's move to downgrade some chip capabilities could end up boosting consumption of high-bandwidth memory

Micron's stock was up fractionally on Monday afternoon.

Nvidia is making a change that could provide a further boost to Micron Technology, according to new analysis.

UBS analyst Timothy Arcuri wrote Monday that he believes Nvidia (NVDA) has moved to "de-spec" its upcoming Rubin Ultra offering, referring to the practice of downgrading certain capabilities of its chip. The Information reported that Nvidia is testing different versions of the chip with less memory due to concerns over high-bandwidth-memory supply.

The result could be less HBM content per chip but more chips in the supply chain, which could lead to overall higher consumption of HBM in 2027 than what was previously forecast, Arcuri said.

Nvidia did not immediately respond to a request for comment about Rubin Ultra.

The supply of HBM is getting tighter, and pricing for HBM4 and HBM4E is "even stronger than our prior expectations," UBS's Arcuri said in a note. Micron's (MU) leadership in dynamic random-access memory has made it one of the top producers of HBM, alongside South Korea's SK Hynix (SKHY) and Samsung Electronics (KR:005930).

Arcuri said "memory suppliers are rewidening" the price premium for HBM, which could send average selling prices up by about 79% from the previous year, compared to his previous estimate for a 67% increase.

Meanwhile, contract pricing for NAND flash memory is trending upward, Arcuri noted. He attributed that to better-than-expected demand for server and storage solid-state drives, which is also helping to offset some of the weakness in the personal-computer market.

While sequential growth in NAND average sales prices may not be as strong as he originally estimated, "the demand backdrop remains constructive," Arcuri wrote. On that, he raised his expectations for bit demand in the NAND industry to grow 23% this year and 26% in 2027. A bit is a unit of storage.

Arcuri said he expects Micron's earnings per share to stay above $160 in 2029, and he predicted that the company could see more than $450 billion in cumulative free cash flow through 2028.

"To us, this increasingly looks like a structural reset in earnings power - where this kind of durability/visibility should command a shift toward a broader semi multiple," Arcuri wrote - meaning Micron could fetch a higher valuation that's more in line with what's seen elsewhere in the chip sector.

Micron's stock was up fractionally on Monday afternoon and was up 209% so far this year, at last check.

The company's chief business officer, Sumit Sadana, said at a conference Monday that Micron expects tight supply to persist beyond 2027 given increasing demand from customers.

"With all of the efforts that we are doing, we still don't have line of sight as to when the supply is going to be able to meet demand, because demand continues to escalate at a very rapid pace over time," Sadana said during an appearance at the KeyBanc Technology Leadership Forum, according to a FactSet transcript.

Memory demand in the AI era has been "very different" compared to past booms in the memory industry, he added, because AI technology is improving quickly in its early stages.

Sadana said growing demand for HBM has put pressure on wafer supply for other memory components, while the act of increasing wafer supply is "just not easy to do," as it's a lengthy process that involves expanding manufacturing capacity.

Additionally, Sadana said customers in Micron's data-center segment and other parts of its business are still keen for more product despite rising prices for memory chips.

-Britney Nguyen

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