Micron Technology's stock has surged 207% in 2026 as demand for AI memory chips has outpaced supply, but the pace of DRAM and NAND price increases is set to slow sharply. That slowdown could cool the earnings momentum behind the rally, leaving Micron's low forward valuation exposed to a pullback.
AI demand for memory chips fueled the rally
Micron's rally may be running out of room. Shares of the chipmaker have surged 207% so far in 2026 as of Friday's close, but slowing price gains for its chips threaten to cool the earnings momentum behind the surge.
The company sells DRAM chips, which help processors handle data, and NAND chips, which store it, along with high-bandwidth memory (HBM), an advanced form of DRAM used in AI systems. Micron is now shipping its HBM4 chip in high volumes to its lead customer, and because HBM uses far more wafer capacity than standard DRAM, rising HBM output has also tightened the supply of conventional memory chips.
Those conditions helped Micron post revenue of $41.5 billion and adjusted earnings per share of $25.10 in its fiscal third quarter, which ended May 28, 2026. Management guided fourth-quarter revenue to $49 billion to $51 billion and adjusted earnings per share to $30 to $32.
Price gains are set to cool
However, the pace of price increases is slowing. Micron's average DRAM selling prices rose in the low-60% range sequentially last quarter, while NAND prices increased in the mid-80% range. TrendForce, a Taiwan-based industry research firm, expects contract prices to rise only 13% to 18% for DRAM and 10% to 15% for NAND in the third calendar quarter.
PC makers are rebuilding DRAM inventories, and cloud providers are stocking up on server memory ahead of an expected 2027 supply shortage, which supports near-term demand. Yet parts of the NAND market are showing early signs of cooling: TrendForce found that NAND wafer prices stopped rising in July as high costs and weak consumer demand curbed trading.
A cheap multiple that could turn expensive
Micron trades at just 5.5 times one-year forward earnings, a valuation that looks cheap only if today's elevated earnings estimates hold. Wall Street's fiscal 2027 EPS estimate for Micron has jumped from $95.80 three months ago to $154.70. Yet it rose only 1.2% over the past month — a sign the upgrade cycle may be stalling.
The company is also raising capital spending to roughly $27 billion in fiscal 2026, though several major capacity projects will not contribute until mid-2027 or later. That makes slowing earnings growth a more immediate risk to the stock than a sudden jump in memory supply. Still, the bearish case would weaken if HBM demand keeps exceeding supply, the HBM4 ramp-up goes smoothly and gross margin stays elevated.
Source: The Motley Fool
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