Micron's Software-Like Margins Signal a Structural Shift in Memory Chips

The options market rarely lies, and on Monday it was screaming conviction. Micron Technology saw a staggering $2.8 billion in option premiums change hands before midday – more than the combined volume of major US index funds. That deluge of bullish bets came as the stock closed at a record €676.00, extending its year-to-date surge to 151.30%. But beneath the headline frenzy lies a more profound story: Micron is no longer being valued as a cyclical memory play.

What’s driving the re-rating is a simple supply-demand choke. “The current demand cannot be covered at all by the supply,” Micron executive Sumit Sadana told analysts. The company is ramping capital spending to over $25 billion in 2026, yet much of that capacity is already spoken for. Micron’s HBM (high-bandwidth memory) capacity is fully pre-sold through the end of this year, insulating the business from the typical boom-bust pattern that has long defined the memory industry.

The buying pressure comes from hyperscalers with near-limitless budgets. Microsoft, Alphabet and Meta are together planning roughly $700 billion in AI infrastructure spending by 2026, with Alphabet and Amazon alone accounting for nearly $400 billion in capital outlays. Meta’s Mark Zuckerberg has explicitly cited rising memory prices as a reason for larger budgets. The result: Micron's second-quarter revenue jumped 196% to $23.9 billion, with adjusted earnings per share of $12.20.

Should investors sell immediately? Or is it worth buying Micron?

Those numbers have forced analysts to rethink the company’s profit potential. Deutsche Bank’s Melissa Weathers raised her price target to $1,000, arguing that high-bandwidth memory and advanced NAND are no longer commodity wares but bottlenecks that limit AI processor performance. The expected gross margins for 2026 now exceed 75% – a level more common in enterprise software than semiconductor fabrication. DA Davidson also set a $1,000 target, citing an unusually long memory cycle. DRAM contract prices rose 58-63% in the current quarter, and full-year increases are forecast at 125%. Gartner expects global memory sales to triple by 2026.

Yet the euphoria is not without its cautionary notes. CEO Sanjay Mehrotra sold 40,000 shares at $536.26 on May 1, contributing to $45.46 million in insider sales over the past three months. Some professional investors are already hedging: Capital Wealth Planning covered one-third of its Micron position via covered call options. The relative strength index sits at 77.9, and the 30-day annualized volatility has hit 84.51%, making the stock vulnerable to sharp pullbacks.

Adding to the uncertainty, Samsung faces a potential general strike starting May 21 over bonus disputes. Jefferies estimates that a walkout could remove roughly 3% of global memory supply, which might actually support prices in the near term but adds a layer of unpredictability.

Analyst sentiment remains overwhelmingly positive – 27 of 30 analysts rate the stock a buy – but dissent is emerging. New technologies such as Alphabet’s “TurboQuant” could slash AI memory requirements, and investor James Foord recently downgraded the shares. For now, the market is banking on the memory bottleneck persisting. Micron’s guidance for the third quarter, with revenue expected at $33.5 billion, is well above the consensus. At roughly 7.6 times projected fiscal 2027 earnings, the stock’s valuation still hinges on the assumption that tight supply will outlast the hype.

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Micron Stock: New Analysis - 12 May

Fresh Micron information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

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