Micron results bolster AI chip trade as analysts rethink memory stocks

Micron Technology’s latest earnings report eased pressure on semiconductor stocks after a bout of concern over AI demand, according to analysts cited by Fortune. The results mattered beyond one quarter because Micron said long-term contracts and tight supply are changing the way memory chips are priced.

Micron reported revenue of $41.5 billion, gross margin of 84.9% and earnings of $25.11 a share, all above Wall Street expectations cited by Fortune of $35.9 billion in revenue and $20.86 a share. The company also guided for $50 billion in revenue next quarter, compared with analyst consensus of $43.6 billion.

Micron shares, which Fortune said closed Tuesday at $1,048.51, rose in after-hours trading. Fortune reported that Nvidia, AMD and other semiconductor stocks also moved higher after the report.

AI demand tightens the memory market

Micron told investors that demand for memory is running ahead of supply and that the gap is expected to last beyond 2027, Fortune reported. The pressure is concentrated in high-bandwidth memory and other chips used in AI data centers, where manufacturing capacity takes years to add.

Jefferies analyst Masahiro Nakanomyo wrote that Micron sees memory becoming a more strategic component as AI systems require more of it, according to Fortune. Micron’s DRAM revenue reached $31.3 billion, up 67% from the prior quarter and equal to 76% of company sales, while DRAM average selling prices rose about 60%.

Micron also reported that core data center revenue more than doubled sequentially to $11.5 billion and rose 653% from a year earlier, Fortune said. Wedbush analyst Dan Ives wrote that the report showed no weakening in AI demand across chips, hardware or software.

Contracts draw analyst attention

Micron said it has signed 16 Strategic Customer Agreements with customers including four large hyperscalers, medium-sized technology companies and nine smaller auto suppliers, according to Fortune. The contracts run from 2026 through 2030 and include take-or-pay terms, binding volume commitments and set pricing ranges.

Fortune reported that Micron has received $18 billion in cash deposits and $4 billion in letters of credit tied to those agreements. The company said the pricing floors would support gross margins above the best quarterly levels Micron reached in earlier memory cycles, which Fortune described as in the low-60% range.

Stifel analyst Brian Chin wrote that the contracts offer evidence of a shift that could reduce the downside swings that have marked memory cycles, according to Fortune. Chin also wrote that the industry’s former margin ceiling has become a floor.

Analysts weigh upside and costs

BofA analyst Vivek Arya kept a Buy rating on Micron and raised his price target to $1,550 from $1,500, Fortune reported. Arya said memory now accounts for about 35% of AI infrastructure capital spending and warned that high memory prices could act as a “tax” on data center spending while hurting demand in price-sensitive markets such as phones and autos.

BofA argued that Micron could trade at 12 to 15 times earnings, above its historical 8 to 10 times range, because of the contracts, AI demand and free cash flow outlook, according to Fortune. Morgan Stanley analyst Joseph Moore raised his price target to $1,200 from $1,050, lifted his fiscal 2027 earnings estimate by 40% to $168 a share and increased his fiscal 2027 free cash flow estimate to $140 billion.

Micron’s expansion plans remain a key part of the outlook. Fortune reported that the company’s 20-year, $200 billion U.S. investment plan includes Idaho Fab 1 producing its first wafers in mid-2027, accelerated construction at Idaho Fab 2 with operations targeted for late 2028, and a New York fab that broke ground in January 2026.

Analysts also cited risks. Stifel’s Chin listed recession, excess supply, weaker-than-expected AI data center spending, Chinese competition, pricing pressure and delays in memory technology roadmaps as possible threats, according to Fortune.

This story draws on original reporting from Fortune.