Micron's (MU) AI Story Defies the Sell-Off — What's Driving the Stock Higher?

Micron Technology (MU) jumped in after-hours trading after the chipmaker posted strong results and issued far stronger-than-expected guidance, helping ease concerns about a broader slowdown in AI spending. The company reported earnings of $4.78 per share, well above Wall Street's estimate of $3.96. At the same time, revenue rose 56.6% year over year to $13.64 billion, also topping expectations.Claim 50% Off TipRanks Premium and Invest with Confidence Unlock hedge-fund level data and powerful investing tools designed to help you make smarter, sharper decisions Stay ahead of the market with the latest news and analysis so your portfolio is always positioned for maximum potential The stock climbed about 8% in extended trading, a notable move on an otherwise weak day for tech. All seven stocks in the Magnificent 7 ended the session lower, while other AI-linked names, including Broadcom (AVGO), Advanced Micro Devices (AMD), and CoreWeave (CRWV), also came under pressure. Guidance Becomes the Real Catalyst for Micron Stock While Micron's quarterly results were solid, it was the outlook that caught Wall Street's attention. For the second quarter, Micron said it expects adjusted profit of $8.42 per share, plus or minus 20 cents. That is nearly double what analysts were expecting. The company also forecast revenue of $18.7 billion, well above Wall Street's estimate of about $14.2 billion. The guidance pointed to rising prices for memory chips, tight supply, and strong demand from AI data centers. AI Demand Is Outpacing Supply Micron makes memory chips used in data centers, personal computers, smartphones, and vehicles. It is also one of only a few major suppliers of high-bandwidth memory (HBM), which is essential for AI servers that train and run large language models. On the earnings call, CEO Sanjay Mehrotra said memory markets are expected to remain tight beyond 2026. He added that Micron can currently meet only half to two-thirds of demand from some key customers. Executives said many customers are receiving less memory than they want, showing how supply constraints are limiting shipments. Why Micron's Outlook Matters for AI Stocks Micron's update suggests that AI spending has not slowed, but instead is running ahead of available supply, especially in data centers. Analysts noted that AI-related demand supports higher margins for Micron and also improves pricing across its other memory products. The company said it is negotiating multi-year contracts with large customers and plans to raise 2026 capital spending to about $20 billion. Micron has also shifted its business toward AI demand, including scaling back parts of its consumer memory operations to focus more on data-center customers. Is MU a Good Stock to Buy? Turning to Wall Street, analysts have a Strong Buy consensus rating on MU stock based on 27 Buys, three Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average MU price target of $263.72 per share implies 16.9% upside potential. However, it's worth noting that estimates will likely change following today's earnings report.