Shares of Micron Technology climbed about 14.2% in early trading on Tuesday after brokerage UBS sharply raised its target price for the stock citing stronger AI demand and long-term supply deals, taking the chipmaker closer to $1 trillion in market value.
The revised target – the highest among the 46 brokerages covering the stock – implies a potential valuation of close to $1.8 trillion for the company by the next twelve months, compared with a market capitalization of $846.93 billion as of close on Friday.
UBS raised the price target more than threefold to $1,625 from the earlier $535, compared with the stock’s Friday close of $751.
The brokerage said the emergence of long-term agreements across the industry, locking in volumes and partially fixing prices could stabilize Micron’s historically volatile earnings profile.
These deals are expected to cover a growing portion of DRAM supply, providing greater demand visibility and reducing pricing swings, according to the brokerage.
There was “no reason” Micron should trade much differently from Nvidia on a price-to-earnings basis as long-term agreements and AI-driven demand reshape the company’s earnings and visibility, UBS said.
The brokerage added that hyperscalers are increasingly willing to trade pricing flexibility for long-term supply assurance, a shift that underpins the contracts and helps stabilize the sector.
As a result, UBS expects Micron to command a higher valuation multiple, moving closer to other semiconductor peers as investors gain confidence in its longer-term earnings durability.
Micron was trading at 8.42 times expected earnings over the next 12 months, compared with 21.1 for the benchmark S&P 500 index and 24.66 for the Nasdaq 100.