Amazingly, shares of Micron Technology (MU +5.07%) have doubled over the past 48 days.
As a result, this week the Boise, Idaho-based semiconductor manufacturer entered the rarefied $1 trillion club. Its market capitalization, as I write this, is about $1.04 trillion. That puts it, in terms of market value, above Walmart, Eli Lilly, and Berkshire Hathaway. Only about 14 publicly traded companies worldwide are valued at $1 trillion or more. Micron's ascent to that level was the quickest in history.
What could be even more amazing is that the company's share price might double again this year. While there's no guarantee of that, of course, it certainly seems possible. Here's why.
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Wall Street seems to think so. UBS, Barclays, and Bank of America all hiked their price targets for the chipmaker in recent days -- by a lot. Bank of America nearly doubled its target for the stock, from $500 to $950. UBS more than tripled its target, from $535 to $1,625.
Importantly, Barclays, which hiked its target by a more modest 74%, seems to believe that Micron is not a cyclical stock, unlike traditional semiconductor stocks.
Micron may no longer be a cyclical stock
Semiconductors have traditionally been similar to a commodity, like crude oil. When demand for oil or chips rises, the price goes up. In response, producers expand production to make more chips or oil. The increased supply then pushes prices back down.
But Barclays noted that Micron recently signed its first strategic customer agreement, which guarantees long-term supply purchases over five years. That removes it somewhat from the traditional boom-bust cycle that the semiconductor industry is used to.
Plus, the outlook for the prices and demand for the dynamic random-access memory (DRAM) and NAND flash memory that Micron makes is eye-popping. Gartner estimates that DRAM and NAND prices this year will soar by 125% and 234%, respectively, with no meaningful price relief until late 2027, at the earliest. The research firm also sees overall semiconductor revenue rising 64% this year, with memory revenue increasing threefold.
Image source: Getty Images.
Much -- probably most -- of that skyrocketing demand is due to the build-out of AI data centers. So-called hyperscalers like Meta Platforms and Google parent Alphabet plan to spend nearly $700 billion on AI infrastructure this year alone. To meet demand for its chips, Micron is undertaking a $200 billion expansion with two high-volume fabs in Idaho and four in New York.
It sounds clichéd, but Micron is a true pick-and-shovel play in the AI revolution. The biggest companies in the world are in a race to provide AI computing power, and Micron -- along with a few other chipmakers -- makes critical components they can't do without.
