Micron (MU) was in the spotlight on Tuesday as HSBC initiated coverage on the tech company with a Buy rating and $330 price target.
Shares rose 2.4% in late morning trading.
“Micron’s share price is up 172% [year-to-date], outperforming the NASDAQ (up 22%) but recently the share price has been subdued as the market appears overly concerned about financial risks from [neo-cloud service providers], and the Stargate Project; we believe that [cloud service providers] which invest with their own EBITDA will maintain their strong capex implementation,” HSBC analyst Ricky Seo wrote in a note to clients. “We see it as a good time to accumulate the stock.”
Delving deeper, Seo said that he believes Micron is likely to benefit from a cycle that could last as long as four to five years, compared to previous cycles that have only lasted two to three years.
We believe Micron will also benefit from a 4-to-5-year-long upcycle, longer than the usual 2- to 3-year cycle historically. Incremental AI spending from neo-cloud service providers, Stargate Project and the major cloud service providers should boost the cycle, while limited capacity should curb any output growth, Seo added. In addition, there is a “booming” need for general server and memory content growth as inferencing becomes more prevalent, while the persistent boom in high-bandwidth memory continues, with Nvidia’s (NVDA) Rubin Ultra likely to need 3.5 more times dynamic random access memory. Lastly, the solid-state drive boom for buffer memory in AI servers and inference is also boosting the memory market, Seo explained.
“We expect the DRAM and NAND markets to grow 69% and 62% [year-over-year] respectively, in 2026e; Micron will be one of the key beneficiaries,” Seo posited.