Micron Technology (MU.US) caught in a tug-of-war between bulls and bears as Morgan Stanley maintains a "neutral" rating with a price target of $135.

Morgan Stanley recently released a research report on Micron Technology, Inc. (MU.US), which has attracted market attention due to its development trend in the memory sector. The company is facing intense news in the memory field, and its stock price and performance, product market situation, and other factors have woven a complex picture. Morgan Stanley has given Micron an "Equal-weight" rating with a target price of $135. The bank believes that the situation of Micron Technology, Inc. is still controversial overall. On the one hand, bearish sentiment has been repeatedly mentioned at various industry conferences, while on the other hand, the company's stock price has continued to rise. From the perspective of risk and return on stock price, the two are relatively balanced, but still have a constructive bias. This bias is not due to the stock price being undervalued, but there is a possibility of being overvalued if the market's enthusiasm for the high-bandwidth memory (HBM) opportunity returns. Based on this, the market has conducted many discussions and analyses around Micron Technology, Inc.'s performance, trends in various memory product prices, and other issues. In terms of specific product price trends, different types of memory products showed different performances in the fourth quarter (4Q). For DDR5, driven by strong demand from large-scale enterprises, its price is expected to rise significantly, and the increase is more significant than shown in third-party reports. This upward trend is still ongoing, with concerns that the tight supply situation for large-scale enterprises will continue until the first half of 2026, further pushing up prices. Meanwhile, demand for mobile phones and personal computers (PCs) met expectations, general server demand was stronger, and demand for artificial intelligence (AI) was very strong. However, the final situation in the fourth quarter is still uncertain as sellers are still waiting and it will gradually become clear in the coming weeks, but overall prices are expected to have a strong upward trend. The price of DDR4 skyrocketed in the fourth quarter, but this had minimal impact on Micron Technology, Inc. because DDR4 accounts for a very low proportion of Micron's revenue, only in the single digits. This price spike was mainly attributed to Intel Corporation's adjustment in the personal computer client roadmap from "Meteor Lake" to "Alder Lake," which had a certain impact. Although "Alder Lake" has a version that supports DDR5, some customers still only use the DDR4 platform. In addition, DRAM manufacturers were reluctant to restart the gradually shrinking DDR4 supply, leading to an extremely tight market supply and further increasing prices. NAND prices also showed strong performance in the fourth quarter, with accelerated demand for enterprise solid-state drives (SSDs) driving overall NAND demand. Strong demand for enterprise SSDs in the cloud sector and concerns about supply in 2026 have stimulated NAND prices. It is expected that NAND prices will remain strong in the fourth quarter, although it is still too early to quantify specific price increases, the actual situation will be stronger than predicted in the models. In terms of HBM, the market discusses whether there is oversupply. The bank believes that there is indeed a certain degree of oversupply, but the claim of "oversupply" is somewhat exaggerated and exaggerates the negative situation. The bank believes that given the relatively low cost of through-silicon via (TSV) production capacity and the opportunities brought by HBM, such as faster growth and higher profit margins, all dynamic random access memory (DRAM) vendors will acquire HBM capacity to match the "ideal scenario" demand for processors. The factor determining the supply and demand of HBM is the front-end production capacity scale built by the industry to alleviate concerns about transaction ratios, although the HBM market is currently not oversupplied, the strong performance in other markets can prove this. Specific to expectations for HBM, the forecast for its market size is much larger than implied processor revenue. Through Morgan Stanley's estimation of disclosed processor sales costs, including NVIDIA Corporation's data center (excluding Mellanox), Broadcom Inc., Marvell Technology, Inc., and Alchip's dedicated integrated circuit (ASIC) processor sales costs, it is estimated that the total sales cost for the 2025 fiscal year (CY25) is $50.5 billion, and the data is close to market consensus, with most of it coming from NVIDIA Corporation, less than a third of which is HBM in its sales cost, and the proportion of ASIC and AMD's this ratio is closer to 50%. Based on Micron's total addressable market (TAM) estimates, HBM will account for 70% of sales costs this year, and if a global estimate closer to $40 billion is used, the proportion of HBM will increase to 80%, this difference is due to the steep slope of HBM capacity ramp-up, meaning there may be a catch-up period next year, but HBM4 will increase transaction ratios. The issue of oversupply is less relevant to HBM compared to DDR5. HBM is a business related to design advantages, more sticky than DDR5, and will not be subject to frequent negotiations on pricing. NVIDIA Corporation hopes that suppliers will be motivated to meet aggressive production schedules, and the buyer's monopoly pricing pressure exerted is more moderate compared to traditional DRAM, and may still allow HBM to command a premium over DDR5, at least in the long run. Micron Technology, Inc.'s target market share is to reach 20%-24% of its overall DRAM share, even if the market size expectations are overly optimistic, this figure should be achievable. Micron excels in terms of performance per watt compared to competitors, although still in the early stages of reliable yield management, it may have inadvertently built capacity slightly higher than expected market share, but should progress smoothly. As for Micron's progress in HBM4, HBM4 will be unveiled along with NVIDIA Corporation's Rubin and AMD and ASIC-based systems in the second half of 2026. There are reports that Micron has decided to use DRAM technology on HBM base wafers instead of logic technology like Hynix or Samsung, which may disadvantage its position; there are also reports that NVIDIA Corporation requires interface speeds higher than JEDEC standards, making it difficult for Hynix and Micron to achieve, putting Samsung in a more competitive position with its new 1C technology. However, the bank is unable to confirm the specific situation, but Micron remains confident in its position, with the company expecting HBM supply to sell out in the 2026 fiscal year, but it will depend on its definition. And higher speeds may only be required for certain products. The bank believes that if there are substantial issues for investors to weigh, Micron's management will not claim to have the best HBM product in the world after delivering HBM4 samples.