Storage chip supercycle sustainability clears RBC's bullish view to Micron Technology, Inc (MU.US) to $525.

Royal Bank of Canada's capital markets (RBC Capital Markets) released a research report, raising the target price of Micron Technology, Inc. (MU.US) from $425 to $525, while maintaining an "outperform" rating, citing optimism for the super cycle in storage chips. The analyst team, led by Srini Pajjuri, stated: "Given the continuous strong price trend in storage chips, we have significantly raised profit expectations. The key issue now is the duration of this cycle - our baseline assessment is that the price increase trend will continue through 2026. Although DDR prices may eventually fall back, the pricing advantages of HBM and the increase in individual load capacity (Rubin Ultra chip HBM load capacity increased approximately 3.5 times) are expected to create sustained positive factors, supporting the market trend until 2027." The analysts further pointed out: "It is worth noting that in this super cycle, structural driving factors (including strong demand for HBM, DDR, and enterprise-grade SSDs from data centers) are playing an increasingly critical role. As the sustainability of the cycle becomes clearer, we expect further expansion in valuation multiples." The analyst team believes that strong demand from AI and data centers is expected to prolong this upward cycle until 2027. Currently, data centers account for half of the revenue in the DRAM industry, and it is expected that AI's strong demand for HBM and DDR memory will continue until 2027. The Pajjuri team added that Micron management recently stated that HBM production capacity in 2026 has been sold out, and the new generation of HBM4 memory is progressing as planned, with mass production and delivery expected in the first quarter of 2026. They expect moderate price drops for HBM3E memory in 2026, while pricing for HBM4 is expected to be 30% to 50% higher than HBM3E. Looking ahead, the team predicts: "With contract renegotiations in 2027, HBM prices are expected to further increase. At the same time, the load capacity of each generation of GPU/XPU with HBM has significantly increased, and this trend is expected to continue until 2027 and beyond (for example, Rubin Ultra has a capacity of up to 1TB of HBM4e, while the Rubin platform has a capacity of 288GB of HBM4). The load capacity of DDR memory in AI servers will also increase significantly, mainly due to the increase in inference workload and the expansion of the context window (the Vera Rubin NVL72 platform is equipped with 54TB LPDDR5 memory, three times that of the GB300 rack system)." The analysts believe that the growth in AI and data center demand is strong enough to offset the soft demand in the PC and smartphone markets. In the NAND flash memory field, driven by the increase in retrieval demand from Johnson & Johnson and the push for smart body AI applications, it is expected that market demand will exceed supply until 2026. Micron Technology, Inc. plans to release its second quarter fiscal year 2025 earnings report on March 18th.