Micron's AI-Driven Chip Surge Reshapes Semiconductor Power Dynamics

Micron Technology Inc. shares reached a record high on Thursday, with the stock climbing over 10% to $156.26, marking a significant milestone in the company's recent performance. This rally is attributed to strong demand for the company's memory and storage solutions, particularly among data-center customers processing artificial intelligence workloads. Analysts have pointed to the growing reliance on high-performance computing and AI infrastructure as a key driver of the company's momentum. Citi analyst Christopher Danely reinforced this view, reiterating a buy rating and raising his price target to $175, indicating approximately 12% upside potential from current levels.

Micron's recent financial performance further supports the optimism surrounding the stock. In its fiscal third quarter, the company reported a near 50% sequential increase in revenue from high bandwidth memory (HBM), a critical component for AI applications. This surge in HBM sales contributed to data-center revenue more than doubling year-over-year, while overall revenue rose 37% compared to the same period in the previous year. The company also reported a near-doubling of its adjusted operating margin, reflecting improved cost management and pricing power.

One of the factors differentiating Micron from its peers is its domestic manufacturing capability, which aligns with U.S. government initiatives to bolster domestic semiconductor production. The company has already received over $6 billion in funding under the CHIPS Act, and analysts suggest this could enhance its competitive positioning as the Trump administration prioritizes domestic semiconductor supply chains. The ability to produce advanced chips within the U.S. is increasingly seen as a strategic advantage in an era of global supply chain uncertainties and geopolitical tensions.

While Micron does not manufacture graphics processing units (GPUs), its role in supplying HBM for AI infrastructure is critical to the performance of these systems. The recent $17.4 billion agreement between Microsoft and Nebius Group for AI infrastructure underscores the scale of investment in the sector and the growing demand for components like those supplied by Micron. Analysts suggest this trend is likely to continue, offering further growth potential for the company.

Despite its strong performance, Micron stock remains attractively valued, with a forward price-to-earnings ratio of just 10. Earnings estimates for the company have been rising, reflecting confidence in its ability to sustain growth. If the company meets or exceeds market expectations in its upcoming earnings report, further gains could follow, potentially leading to double-digit returns in the short term and continued appreciation over the next three years.