Micron (MU): A High-Conviction Buy as AI Memory Demand Unlocks Record Margins and Pricing Power

The artificial intelligence (AI) revolution is reshaping global computing infrastructure, and at its core lies a critical bottleneck: memory demand. For Micron Technology (NASDAQ:MU), this structural shift represents a golden opportunity. With High Bandwidth Memory (HBM) revenue projected to nearly double to $34 billion in 2025 and grow at a 33% compound annual rate through 2030, Micron's leadership in HBM3e production-essential for Nvidia's AI platforms-positions it to dominate a market where supply constraints and pricing power are converging. Coupled with disciplined supply management and a recent surge in analyst upgrades, Micron's stock is poised for outperformance in 2026.

Structural Tailwinds: AI-Driven Memory Demand and Micron's Strategic Edge

The AI boom is creating an insatiable appetite for advanced memory solutions. HBM, a high-performance chip critical for training large language models and generative AI systems, is at the forefront of this demand. According to a report by CEO World, HBM revenue is expected to reach nearly $100 billion by 2030, driven by data center expansion and AI infrastructure investments.

Micron's HBM3e chips are already fully booked for 2025 production, underscoring the company's pivotal role in this supercycle.

Micron's competitive positioning is further strengthened by its focus on power efficiency, a key differentiator in data center applications. While SK Hynix currently holds ~61% of the HBM market, Micron's ~25.7% share is expanding as its power-optimized designs gain traction. The transition to HBM4 in late 2026 will further solidify Micron's edge, ensuring sustained demand for its cutting-edge products.

Supply Discipline and Pricing Power: A Recipe for Margin Expansion

Structural supply constraints are amplifying Micron's pricing power. Foundry and advanced-package capacity for HBM and DDR5 remain limited, creating a bottleneck that elevates prices. This dynamic is reflected in Micron's financials: its gross margin expanded to 56.8% in fiscal Q1 2026, driven by robust pricing and demand outpacing supply. Analysts at Barclays highlight that Micron's disciplined approach to capacity management-avoiding overinvestment in legacy technologies-has preserved its profitability amid industry-wide volatility.

The company's strategic restraint is paying off. By prioritizing high-margin HBM production over lower-margin DRAM, Micron is capitalizing on the AI-driven shift in demand. As stated by a report from Long Yield, this focus has transformed DRAM and HBM into "strategic assets", with pricing momentum expected to persist through 2026.

Analyst Upgrades and Earnings Outperformance: A Validation of Momentum

Micron's recent financial results have reinforced its bullish narrative. In Q4 2025, the company reported non-GAAP earnings per share of $4.78, surpassing the consensus estimate of $3.77, while revenue hit $13.64 billion-5% above expectations. These results have triggered a wave of analyst upgrades. KGI Securities upgraded Micron from "hold" to "strong-buy" in September 2025, while Barclays raised its price target to $275.00 with an "overweight" rating in December. As of December 2025, 37 analysts maintain a "Buy" rating, with some projecting upside potential of up to 80%.

The 2026 Outlook: A High-Conviction Case

With AI-driven demand accelerating and supply discipline intact, Micron is uniquely positioned to outperform. The company's gross margin expansion, pricing power, and strategic alignment with the HBM supercycle create a compelling investment thesis. Analysts' elevated price targets-from $300.00 to $350.00-reflect confidence in Micron's ability to sustain its momentum. For investors seeking exposure to the AI revolution's infrastructure layer, Micron offers a rare combination of technical leadership, financial strength, and structural growth.