Micron Caught in AI Frenzy Amid Bull-Bear Tug-of-War! UBS Backs Strong Fundamentals, Expects Share Buyback Restart in December

Micron (MU-US) stock was undoubtedly a beneficiary of the artificial intelligence (AI) frenzy on Wednesday (23rd), but as AI-related themes evolve, investors are increasingly focused on whether demand for memory chips can sustain. In this context, analysts at UBS maintain an optimistic outlook on the company’s future potential.

UBS analyst Timothy Arcuri stated that the supply-demand gap for memory chips is expected to continue widening into next year, indicating that Micron’s fundamentals remain strong. He noted that Micron’s stock price is currently “still a tug-of-war between momentum and sustainability.”

Arcuri expects Micron to supply approximately 60% of DRAM demand next year, while bit demand for server DDR memory could grow by about 80% next year. Additionally, bit demand for SSDs used in servers and storage devices could more than double by 2027. A “bit” is the smallest unit of data storage.

Long-Term Contracts Cap Revenue Upside; Investors Shift Focus to Demand Sustainability

Arcuri explained that long-term supply agreements Micron has signed with customers are beginning to “cap” the upside potential of revenue forecasts. Investors should therefore focus on “the sustainability of demand, particularly capital returns,” he said.

Following receipt of funding under the 2022 CHIPS and Science Act, Micron was temporarily restricted from repurchasing its own shares. This restriction is set to be lifted in December, and Arcuri anticipates that Micron will initiate a share buyback program during that quarter (December–February), amounting to approximately $20 billion, with subsequent buybacks potentially increasing to $40–50 billion per quarter.

Micron is scheduled to release its earnings report next week, but Arcuri believes the company “may not want to disclose” related details prematurely, so the earnings call might not elaborate on the buyback plan.

Micron’s stock closed down 2.2% on Wednesday, ending at $1071.88 per share, but has surged 275% year-to-date.

Chris Caso, an analyst at Wolfe Research, shares a similar view. He stated that Micron’s long-term supply agreements give investors greater confidence in the longevity of the demand surge. He believes that, over the long term, accelerated capacity expansion and increased cleanroom space for manufacturing could become the primary drivers of most of the company’s growth.