As the "Big Short" doubles down on shorting, Citi and Wells Fargo continue to stay bullish on Micron (MU.US): memory supply remains tight, and the earnings upcycle is not over.

Recently, Michael Burry, known as the "Big Short," said he has increased his short position in Micron Technology, Inc. (MU.US). At the same time, some divergence appears to have emerged on Wall Street Citi raised its target price, while Wells Fargo & Company cut its. But unlike Burry, both investment banks remain bullish on the memory chipmaker. Citi analyst Atif Malik raised Micron's target price from $1,150 to $1,300 and maintained a "Buy" rating. Wells Fargo & Company's Aaron Rakers cut his target price from $1,525 to $1,400, but kept his rating at "Overweight." Malik's reason for raising the target price is straightforward DRAM pricing is much stronger than expected. Citi raised its earnings forecasts for Micron's August and November fiscal quarters, citing continued supply shortages in both the DRAM and NAND markets. Specifically, Citi expects blended DRAM average selling prices to rise 20% quarter over quarter in the August fiscal quarter and another 13% in the November fiscal quarter; NAND price increases are even sharper, reaching 34% and 15%, respectively. The investment bank also noted that Micron's stock price could see a rally ahead of the SEMICON West exhibition on October 13, as semiconductor equipment makers are expected to discuss the DRAM shortage at that time. Citi's view on NAND is also worth noting. Although consumer NAND demand has weakened due to limited supply to PC and phone customers, enterprise SSD demand continues to grow, driven by AI inference, enough to offset the weakness on the consumer side. Wells Fargo & Company's move looks contradictory the target price was cut by 8%, but Rakers actually raised his earnings per share forecasts for fiscal 2027 and 2028 by more than 10%. The target price cut is not because of a bearish earnings view, but rather a larger discount for "uncertainty around peak earnings." Rakers wrote in his report that investors will continue to debate whether Micron's fiscal 2028 EPS can reach $200 per share. His near-term view remains unchanged "tight memory supply, expanding strategic customer agreements (SCAs), and Micron's strong execution" are still the three factors supporting an earnings upcycle. Wells Fargo & Company expects DRAM and NAND supply to remain below demand through 2027. Micron has already signed 16 SCAs, which provide "downside protection and a price floor." The data speaks: third-quarter price increases were even stronger than model forecasts A channel survey published last week by BofA Securities analyst Simon Woo gave the bulls real ammunition. The survey showed that in the third quarter of 2026, average prices for most DRAM products rose 20% to 30% quarter over quarter, while NAND rose more than 15%. That is much stronger than TrendForce's July forecast of 13% to 18%. Even more noteworthy is one signal: hyperscale cloud providers have already signed new contracts agreeing to pay higher DRAM prices in the first quarter of 2027 than in the fourth quarter of 2026. It is not common in the history of the memory industry for buyers to proactively accept price increases and lock those expectations into contracts. BofA also raised its DRAM average price forecasts for 2027 to 2028 by 8% to 12%, while lifting its 2030 global memory market size forecast from $1.8 trillion to $2.0 trillion. That said, BofA is not uniformly bullish it expects prices to fall about 10% in 2028 from the 2027 high, amounting to a "soft landing." Stifel analyst Brian Chin's view is more aggressive. He estimates that DRAM bit supply would need to grow by more than 40% to 50% in 2027 to truly close the supply-demand gap, while actual growth may only reach 15% to 20%. Chin wrote in his report: "We believe the durability of this memory upcycle is still underestimated." Burry adds to short position But amid all the bullish voices, Michael Burry said in a post on Substack on Tuesday that he had added to his short position in Micron "at a fairly sizable scale." The investor famous for "The Big Short" cited comments from Acer CEO Jason Chen growth in mainland China's memory chip output could eventually ease supply constraints and put pressure on prices, with the impact becoming clear around the end of 2027. Burry's logic is this: part of the traditional memory shortage stems from manufacturers shifting capacity to HBM used for AI, and now production of ordinary memory is recovering, so the supply-demand gap will gradually narrow. His short positions are not limited to Micron; they also include semiconductor ETF-iShares (SOXX.US) and AI-related names such as Palantir Technologies (PLTR.US). Burry expressed clear doubts about the valuations of memory chipmakers. He described their share prices as having "risen to absurd levels relative to themselves," and predicted that once the cycle reverses, the relevant stocks will face "violent selling." The question investors really care about For now, the bull-bear divide over Micron ultimately comes down to one question: when will capacity expansion in the memory industry truly catch up with demand. The bulls see AI-driven structural demand growth, revenue visibility locked in by long-term agreements, and a persistently tight supply-demand backdrop; the bears are betting on a gradual recovery in supply and price pressure from Chinese manufacturers' capacity expansion. Micron's current forward P/E is about 7.3 times, making it almost the cheapest stock in the tech sector. But cheap has its reasons. The market gives memory stocks a valuation discount because the industry is so cyclical, and everyone fears buying at the top of the cycle. TD Cowen's Krish Sankar believes this cycle is different from previous ones. His reasoning is that DRAM demand is now increasingly coming from AI data centers rather than relying on phones and PCs, and the durability and scale of that demand are on a different order of magnitude from the past. Sankar's target price for Micron is $1,600. His valuation logic is not based on higher earnings forecasts, but on the view that the market should assign Micron a higher P/E multiple. That said, Sankar also acknowledges that Micron has already gone through about 80% of a typical margin expansion cycle, and the room for further large upward revisions to earnings forecasts is narrowing. Micron's fourth-quarter earnings report, due to be released on September 30, may provide some new clues in this debate.